Starting today's barrage of Treasury Bill and Note supply, which will see $145BN in 3M and 6M Bills, and 3Y and 10Y Notes, moments ago the Treasury sold $28BN in 3Y notes in what was a surprisingly strong auction. This was the biggest 3Y auction since June 2014 as the Treasury begins to pre-fund the surging US budget deficit.

The auction high yield of 2.436% stopped through the When Issued 2.438% by 0.2 bps. It was the highest yield since May 2007 (when it was suspended until November 2008), and well above last month's 2.28%.

The bid to cover of 2.94 was fractionally below February's 3.00%, but just above the 6 month auction average of 2.93.

The internals were solid, with Indirects taking down 50.0%, above last month's 49.8%, but just below the 6M average of 52.9%. Directs were awarded 9.3%, above the 6 auction average of 9.2%, leaving Dealers holding 40.7%, virtually identical with last month's 40.5% if slightly above the recent average of 37.9%

At the same time the Treasury also sold 6Month bills which saw a spike in demand, with the Bid to Cover jumping 3.67%, well above the previous auction's 3.19.

As Bloomberg notes, the auction was expected to benefit from outright yield and curve valuation, while negatives include increased size, biggest since June 2014. In the end the positives appear to have won, and overall it was a solid start to today's mammoth issuance, which will see 3M and 10Y auctions pricing in just under 90 minutes, at 1pm ET.