U.S. Treasuries subdued with tomorrow FOMC in focus after the completion of today’s $43 bln 5-yr note auction, which met weaker demand than yesterday’s 2-yr note sale. Not a surprise there with what we have been seeing on the curve and event risk. The auction drew a high yield of 4.170%, which tailed the when-issued yield by 0.4 bps while the bid-to-cover ratio (2.60x) was a bit above average (2.47x) and indirect takedown (64.4%) came up short of the prior 12-auction average (67.5%). Equities continue to rally with the S&P 500 (+0.3%) and the Nasdaq (+0.8%).
The desk gave a D+ rating on the auction. Today’s sale followed yesterdays $42 bln 2-yr note auction. Tomorrow sees a $35 bln 7-yr note sale.
Today’s $43 bln bid-to-cover ratio (2.60x) and indirect takedown (64.4%) were mixed. The desk gave a C rating on the auction.
- The domestic demand was above its 12-month average indicative of domestic demand higher on the curve.
- International demand (indirect) was below 12-month average.
Auction Highlights
- Duration: 5 Years
- Amount: $43 billion
- High yield 4.170%
- WI level at the time of the option 4.012%
- Tailed the when-issued yield by 0.4 bps
- Bid to cover 2.60X vs 12-month average of 2.47X
- Directs (a measure of domestic demand) 22.1% versus 12-month average of 17.9%
- Indirects (a measure of international demand) 64.4% versus 12-month average of 67.5%
Auction grade: D+
Yields after the auction.
- 2-yr: UNCH at 4.89%
- 3-yr: +8 bps to 4.55%
- 5-yr: +6 bps to 4.19%
- 10-yr: +5 bps to 3.90%
- 30-yr: +2 bps to 3.94%
Yields Before the Auction.
- 2-yr: +1 bp to 4.90%
- 3-yr: +8 bps to 4.55%
- 5-yr: +6 bps to 4.18%
- 10-yr: +4 bps to 3.90%
- 30-yr: +1 bp to 3.93%
Prior auction results:
- High yield: 4.019%
- Bid-to-cover: 2.52
- Indirect bid: 68.1%
- Direct bid: 19.7%
Average results of previous 12 auctions:
- High yield: 3.752%
- Bid-to-cover: 2.47
- Indirect bid: 67.5%
- Direct bid: 17.9%
Live From the Pit
From The TradersCommunity US News Desk