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Learn the Desk: Rates & Auction Mechanics

Short, precise explainers on the mechanics behind every number on the desk. each with a live worked example from our own captured data.

Glossary

Bid-to-Cover Ratio

Bid-to-cover ratio explained: how the demand gauge in Treasury auctions is calculated, what counts as strong, and a worked example with real numbers.
Auction Tail

Auction tail explained: why a Treasury auction stopping above the when-issued yield moves markets, how big is bad, and a worked 30-year example.
Stop-Through

Stop-through explained: when a Treasury auction stops below the when-issued yield, why it signals hidden demand, and a worked 2-year note example.
When-Issued Yield

When-issued yield explained: how Treasuries trade before they exist, why the 1pm WI snapshot defines the auction tail, plus a worked 5-year example.
Indirect Bidders

Indirect bidders explained: why the indirect award is the market's proxy for foreign Treasury demand, typical percentages, and a worked 10-year example.
Direct Bidders

Direct bidders explained: the domestic funds bidding straight to Treasury, why a spike in directs matters, and a worked 7-year auction example.
Primary Dealers

Primary dealers explained: the banks obligated to bid at every Treasury auction, why a high dealer takedown is bearish, and a worked 30-year example.
2s10s Spread

2s10s spread explained: how the 10-year minus 2-year Treasury spread works, bull vs bear steepening, and a worked CPI-day example in basis points.
Yield Curve Inversion

Yield curve inversion explained: why 2s10s going negative has preceded every modern US recession, the un-inversion trap, and a worked example.
Basis Points

Basis points explained: why 1bp = 0.01%, how rates traders quote everything in bips, and a worked example converting a 13bp move into dollars.
Duration

Duration explained: how bond price sensitivity to yields works, the rules of thumb by tenor, and a worked P&L example on a 6bp move in 10s.
Term Premium

Term premium explained: the extra yield for holding long bonds, why it drives bear steepening and supply selloffs, with a worked 10-year decomposition.
SOFR

SOFR explained: how the Secured Overnight Financing Rate is set from repo trades, why spikes signal funding stress, and a worked quarter-end example.
Fed Funds Rate

Fed funds rate explained: how the FOMC's target range anchors every US rate, how futures price cuts, and a worked example of CPI repricing the path.
Dot Plot

The Fed dot plot explained: how FOMC rate projections work, why the median dot moves markets four times a year, and a worked hawkish-SEP example.
Core CPI

Core CPI explained: why inflation ex food and energy moves markets to the second decimal, how traders decompose it, and a worked 0.1pp-miss example.
Nonfarm Payrolls (NFP)

Nonfarm payrolls explained: what NFP measures, why the jobs report is the biggest print in macro, how internals trump the headline, worked example.
Surprise Z-Score

Surprise z-score explained: how standardizing beats and misses makes CPI, NFP, and retail sales comparable, with thresholds and a worked example.

FOR AI AGENTS

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