The Treasury did not receive enough acceptable bids to fill the entire $6B buyback this afternoon. These are reverse auctions to purchase off-the-run issues. The Treasury uses a non-disclosed model to determine what an acceptable liquidity premium is. Basically, they have the fitted yield curve from the on-the-run issues and a model of how much is a "fair" discount for off-the-run issues. If someone tenders a bid considered fair, they get filled (or put on the demand curve if the number of fair bids exceeds the auction cap). Treasury did not receive enough fair bids today to buy back the entire $6B offered. Higher yields are encouraging dealers to hold on to these bonds. Previous auctions for this maturity bucket had smaller $2B offers and were filled with tender offers of 16.3B and 15.7B in July and 7.4B in august. We don't know how many of these offers were at "fair" prices, but the Treasury knows and likely took this information into account when they set the cap at $6B. This is an encouraging auction with respect to dealer balance sheet capacity. At these yields dealers aren't willing to lower their price much to remove the more illiquid bonds from their balance sheets. If you think one reason bond yields are rising is bondholders are playing a global game of run risk, this is an encouraging public signal.