5-Year Treasury Bond Auction Softer than Strong Demand in 2-Year Sale

Treasuries sat near their lows as the market responded to the results of today’s $43 bln 5-yr note auction. The U.S. Treasury conducted two auctions today ahead of tomorrow’s $35 bln 7-yr note offering. The early $42 bln 2-yr note sale found solid demand while the 5-yr note auction was on the soft side. The U.S. Dollar Index climbed 0.9% to 107.84, reaching a ten-day high. The desk gave an C- rating on the auction. The S&P 500 and Nasdaq indices were range bound going in.

Today’s $43 bln bid-to-cover ratio (2.39x) and indirect takedown (66.2%) were above average.  The desk gave an C- rating on the auction.

  • The domestic demand was above its six-month average indicative of stronger domestic demand
  • International demand (indirect) was comfortably above the six-month average

Auction Highlights

  • Duration: 5 Years
  • Amount:  $43 billion
  • High yield 3.974%
  • WI yield 3.967%
  • Tail -0.7 vs. six-month average of 1.2 basis points
  • Bid to cover 2.39X vs 6-month average 2.35X
  • Directs 18.7% vs 18.2% 6-month average
  • Indirects 66.2% vs 62.4% 6-month average

Auction grade: C-

Yields after the auction

  • 2-yr: -4 bps to 4.42%
  • 3-yr: -4 bps to 4.41%
  • 5-yr: -7 bps to 4.19%
  • 10-yr: -10 bps to 4.01%
  • 30-yr: -10 bps to 4.16%

Prior auction results:

  • High yield: 4.192%
  • Bid-to-cover: 2.48
  • Indirect bid: 68.0%
  • Direct bid: 15.6%

Average results of previous 12 auctions:

  • High yield: 2.653%
  • Bid-to-cover: 2.41
  • Indirect bid: 63.2%
  • Direct bid: 17.8%

Live From the Pit

From The TradersCommunity US News Desk