After yesterday's mediocre 3Y auction, moments ago the US Treasury sold $23 billion in 10 year paper in a very well received auction. The high yield of 2.314% was fractionally lower than October's 2.346%, and stopped through the When Issued 2.316% by 0.2bps. 94.01% of the bids at the high yield were accepted. This was the first 10Y refunding to stop through since August 2016.

The bid to cover of 2.48 was fractionally lower than last month's 2.54, and was higher than the 6 month average of 2.40. In light of the recent rush into the long end, it is perhaps no surprise that the internals were quite so strong. Like last month, a solid foreign, i.e., Indirect, takedown helped to lead the way. Indirect bidders took down 68.0% of the auction, just under October's 69.1% but well above the 6MMA of 62.3; Directs took down 9% of the auction, more than the 5.8% 6 month average, while Dealers were left holding 23%, the lowest since March.

Yet while the auction was strong, it did little to change the trajectory in today's curve move, which after starting off flatter for the 9th consecutive day, has progressively, if slowly, stepened, and just after 2pm the 2s10s was at 68.23bps.

With the ominous signal sent by an increasingly flatter yield curve, all eyes will remain solidly glued to where the long end goes from here.