Strong Demand in 5-Year Treasury Auction Follows Yesterday’s Strong 2-Year

U.S. Treasuries added to their lows after the recent completion of a $43 billion 5-yr note sale, which met strong demand which followed yesterday’s equally impressive 2-yr note auction.  The high yield (3.749%) stopped through the when-issued yield by 1.4 bps while the bid-to-cover ratio (2.58x) and indirect takedown (72.7%) were above average. With increasing uncertainty over the debt ceiling equities have been selling off. The desk gave a B- rating on the auction. Today’s sale followed yesterdays $42 bln 2-yr note B+ rated auction. Tomorrow sees a $35 bln 7-yr note sale.

Today’s $43 bln bid-to-cover ratio (2.58x) and indirect takedown (71.7%) were above average.  The desk gave a B+ rating on the auction.

  • The domestic demand was at its 12-month average indicative of domestic demand lower on the curve.
  • International demand (indirect) was comfortably above 12-month average.

Auction Highlights

  • Duration: 5 Years
  • Amount:  $43 billion
  • High yield 3.749%
  • WI level at the time of the option 3.753%
  • Stopped through by 1.4 bps basis points versus the 6 month average of -0.6 basis points
  • Bid to cover 2.58X vs 12-month average of 2.44X
  • Directs (a measure of domestic demand) 18.0% versus 12-month average of 18.0%
  • Indirects (a measure of international demand) 72.7% versus 12-month average of 65.7%

Auction grade: B+

Yields after the auction.

  • 2-yr: UNCH at 4.34%
  • 3-yr: +5 bps to 4.03%
  • 5-yr: +3 bps to 3.78%
  • 10-yr: +2 bps to 3.72%
  • 30-yr: +1 bp to 3.97%

Prior auction results:

  • High yield: 3.500%
  • Bid-to-cover: 2.54
  • Indirect bid: 69.1%
  • Direct bid: 17.3.%

Average results of previous 12 auctions:

  • High yield: 3.606%
  • Bid-to-cover: 2.44
  • Indirect bid: 65.7%
  • Direct bid: 18.0%

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From The TradersCommunity US News Desk