Treasury Sells 5Y Paper At Highest Yield Since Sept 2008 To Lukewarm Demand

If yesterday’s 2Y auction was ugly, with poor bidside demand, today’s 5Y was at worst average.

Moments ago, the Treasury sold $35B in 5Y paper, the most for a single 5Y auction since Jan 2016, at a high yield of 2.837%, stopping through the When Issued 2.838% by 0.1bps and more than 20bps higher than the 2.612% yield in March. This was the highest yield since September 2008, and is where the 10Y yield was trading exactly one week ago.

The internals showed a modest improvement, with the Bid to Cover virtually unchanged at 2.49, down from 2.50 last month, if above the 6 auction average of 2.45. What is more interesting is that Direct bidders took down 13.7% of the auction, vs 8.3% last auction, 10.1% in the prior six, and the highest Direct award since August 2014. Indirects, meanwhile, dipped from 63.5% in March to 60.2% (and below the 62.0% 6 month average) leaving Dealers holding 26.2% of the auction, a little below the 6 auction average of 27.9%.

Overall, an average auction, one which had little impact on the rest of the curve, or the pricing of 5Y paper itself in the open market.