In what was almost a carbon copy replica of yesterday’s 2 Year Treasury auction, moments ago the Treasury sold $34 billion in 5 Year paper, with rates all comfortably positive in the repo market, which explains why the 1.988% high yield once again tailed the When Issued of 1.976%. The tail of 1.2bps was the biggest since last July.
However, unlike the 2 Year auction, the internals in today’s 5 Year issuance were far weaker, and confirming the lackluster demand, the Bid to Cover tumbled to 2.38, well below December’s 2.72, below the 6MMA of 2.47%, and the lowest since July. Additionally, while Indirect interest dipped from December’s 71.4% to 63.3%, it was still modestly higher than the 6 month average of 62.5%. With Directs taking down 4.6%, Dealers were left with 32.1%.
In total, a weak showing in today’s primary market, which explains why the curve has sold off on the report, with the 10Y yield back to day highs.
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