Today's 10-year bond auction will be critical to understanding whether US Treasuries' foreign demand increases amid a rise in yields.
David Tepper, the founder of Appaloosa Management, said that the selloff in Treasuries is likely over because foreign investors will start to buy Treasuries at current yield levels. Nevertheless, yesterday's sale of 3-year Treasury notes proved quite the contrary.
Information concerning foreign demand of US government bonds is contained within indirect bidders' data, which in the past few Treasury auctions showed is in decline. News outlets reported that yesterday's 3-year note auction was solid, highlighting that the bid-to-cover ratio was the highest since June 2018. However, when looking at the composition of that demand, the snapshot is troubling. Indeed, while bidding metrics as a whole point to higher demand, indirect award declined to 47.8%. It means that foreign entities are still not buying into US Treasuries despite higher yields.