Dismal F Rated 5-year Treasury Bond Auction Follows Yesterday’s Brutal 2-Year Sale

Treasuries continue to sell off, adding to their losses reaching fresh lows after the completion of today’s dismal $44 bln 5-yr Treasury note auction, which followed yesterday’s brutal $43 bln 2-yr note auction meeting weak demand. The sale drew a high yield of 4.228% with a long 2.6 bps tail and bid-to-cover ratio below their respective prior 6 and 12-auction average. The desk gave an F rating on the auction. The S&P 500 and Nasdaq 100 are near the low for the day.

Bond markets have been rocked in the past week as Central Banks globally ratcheted up rates. The benchmark 10-year Gilt was ravaged on Friday an through today after the Bank of England released a statement. U.S. Treasuries haven’t been left out. U.S. Treasuries sit on their lows after widening their initial losses after

In just one month the US government is paying nearly a full percentage point, over $2 billion in extra interest over the life of these bonds.

Today’s $44 bln bid-to-cover ratio (2.27x) and indirect takedown (59.6%) were below average.  The desk gave a F rating on the auction.

  • The domestic demand was below its twelve-month average indicative of softer domestic demand
  • International demand (indirect) was also comfortably below the six-month average
  • Primary dealers were left with 21.9 % versus normal around 22.2%

Auction Highlights

  • Duration: 5 Years
  • Amount:  $44 billion
  • High yield 4.228%
  • WI 4.202%
  • Tail 2.6 basis points vs. six-month average of 0.6 basis points
  • bid to cover 2.27X vs. a six-month average of 2.40X
  • Directs 18.7% vs six-month average of 19.0%
  • Indirects 59.6% vs six-month average of 61.9%
  • Dealers 21.7% vs. six-month average of 19.1%

Auction grade: F

Yields after the auction

  • 2-yr: UNCH at 4.31%
  • 3-yr: +2 bps to 4.41%
  • 5-yr: +7 bps to 4.23%
  • 10-yr: +10 bps to 3.98%
  • 30-yr: +14 bps to 3.84%

Prior auction results:

  • High yield: 3.230%
  • Bid-to-cover: 2.30
  • Indirect bid: 61.2%
  • Direct bid: 18.2%

Average results of previous 12 auctions:

  • High yield: 2.131%
  • Bid-to-cover: 2.42
  • Indirect bid: 62.5%
  • Direct bid: 18.1

Live From the Pit

From The TradersCommunity US News Desk