With both foreign and domestic investors dumping gold (and anything else not nailed down) to fund oil, at its brand sparkling new price of $170 (in Asia), we were wondering how long before the lack of disposable cash hits US debt. We got the answer today at just after 1pm when we got the results of today's $69 billion 2Year bond auction. In a nutshell, it was terrible.

The auction priced at a high yield of 3.936%, up from 3.455% last month and the highest since May 2025. It also tailed the When Issued by a whopping 1.8bps, the highest tail since March 2023.

The bid to cover was a piss poor 2.440, down sharply from 2.630 and the lowest since May 2024. 

The internals were also ugly, with Indirects taking 59.98%, an improvement from 55.91% in February, but it was the Direct bidders that unexpectedly tumbled from 42.3% to 16.50%, the lowest since March 2025. This left Dealers holding 24.12% of the auction, up sharply from 9.81% and the highest since October 2022. 

Overall, this was a very ugly auction, and the only thing that could have made it catastrophic was if Indirects had also refused to participate. For now they haven't but at this rate it's just a matter of time before Indirects go limit down and Dealers are forced to carry the entire auction.