The short-end just keeps on rising, with the latest auction of $38BN in 2Y paper stopping at a high yield of 2.880%, up from 2.825% in September, the highest since July 2008, and stopping 0.1bp through the When Issued 2.881%. The auction size has been increasingly progressively from $26BN in January to $38BN currently as there is an increasingly larger budget gap that needs to be filled.

The internals were generally in line, with the Bid to Cover rising from 2.437 to 2.671, if below the 2.75 6 month auction average.

The biggest surprise was in the buyside takedown, because whereas Indirects took down a healthy 52.6% of the auction, the highest since December 2016, well above last month's 40%, and above the 6 auction average of 42.0%, it was the Directs that got spooked, and after being awarded 13.4% last month, they only took down 5.50% this time, the lowest since August 2009. Dealers were left with 41.9%, just below the 6 auction average of 46.6%.

Overall, a strong auction on the short end, and one which appears to have sparked a bit of an equity rally, if having little effect on the overall yield curve.