US Treasury 3-Year Note Auction Sees Primary Dealer Take Hit 2004 Low

The US Treasury on May 7 (local time) issued $58 billion in 3-year notes at a yield of 4.179%, marking 1.3 basis points lower than the previous month's 4.192%. The auction attracted solid demand, with the yield settling 0.6 basis points below the when-issued trading level, indicating stronger-than-expected market appetite. The primary dealer take dropped to 7.7%, the lowest level since 2004, as indirect and direct bidders absorbed a larger share of the issuance.

US Treasury 3-Year Note Auction Results Detail

The bid-to-cover ratio stood at 2.60x, down from 2.64x in the previous month and below the six-month average of 2.61x. Indirect bidders, representing foreign investor demand, accounted for 67.5% of the allocation, up 3.8 percentage points from the prior auction. Direct bidders took 24.8%, also rising 3.8 percentage points month-over-month.

Primary dealers absorbed only 7.7% of the unsold volume, down sharply from 15.3% in the previous month. This marked the lowest primary dealer take for 3-year notes since 2004, according to data from the US Treasury.

Secondary Market Yield Response to Auction

In the secondary market, the 3-year Treasury note yield slightly narrowed its gains shortly after the auction results were released around 1 PM New York time. The yield movement reflected the better-than-anticipated demand shown in the auction metrics.

FAQ

What was the yield on the US 3-year Treasury note auction held on May 7?

The US Treasury issued $58 billion in 3-year notes at a yield of 4.179% on May 7 (local time), which was 1.3 basis points lower than the previous month's 4.192% and 0.6 basis points below the when-issued trading level.

Why did the primary dealer take hit a 2004 low in this auction?

The primary dealer take dropped to 7.7%, the lowest since 2004, because indirect bidders (foreign investors) and direct bidders absorbed a significantly larger share of the issuance at 67.5% and 24.8% respectively, both up 3.8 percentage points from the previous month.