Tailing 5Y Auction Prices At Lowest Yield Since 2017
After yesterday’s surprisingly stellar 2Y auction, moments ago the Treasury sold $41 billion in 5Y paper in a decidedly weaker auction.
Today’s auction stopped at a yield of 2.172%, which while far below February’s 2.489%, and the lowest since November 2017, tailed the 1pm When Issued 2.162% by 1 basis point, the biggest tail since December’s 2.3bps, reflecting the recent rally across the curve coupled with the fact that the 5Y remains the “richest” tenor on the curve.
The internals were lackluster as well, with the Bid to Cover dropping to 2.35 from 2.40 last month, if right on top of the 2.35 six auction average. And while Indirects took down a healthy 59%, above February’s 57.7% and better than the 58% recent average, it was nowhere near the spectacular Indirect demand observed in yesterday’s 2Y auction. In other bidding groups, Dealers took down 23.8% below the 30.5% six auction average, while Direct buyers were left with 17.2% of the auction, modestly below February’s 22.5% if solidly above the six auction average of 11.5%.
Overall, a mediocre auction where the lack of shorts coupled with the recent collapse in yields may have resulted in limited demand, even though the final result was far from concerning.