U.S. Treasury's 3-year note auction yields 4.627%, graded C−

• The when-issued level at auction time stood at 4.622%.

• The auction's high yield came in at 4.627%.

• The tail measured 0.5 basis points, while the average stop-through is 0.1 basis point.

• Bid-to-cover ratio was 2.53 times, versus the typical 2.64 times.

• Direct bidders accounted for 35.0%, compared with an average of 25.2%.

• Indirect bidders took 55.5% of the offering, below the average of 62.7%.

• Dealers absorbed 9.5%, under the average of 12.1%.

The auction received a C− grade.

Results were somewhat lackluster. The high yield exceeded the when-issued level by 0.5 basis points, and the bid-to-cover ratio lagged its historical average. Indirect participants claimed a smaller proportion than usual, but direct bidders increased their allocation to 35.0%, above the typical 25.2%. That helped keep the dealer cut below average at 9.5%. The solid direct demand cushioned the outcome, but the tail and softer overall demand pushed the grade to C−.