The string of stellar auctions continued for a second, when moments ago the Treasury sold $34 billion in 5 Year Notes, in an auction which – just like yesterday’s 2Y – blew the market away, when the high yield printed at 1.125, stopping through by 0.7bps, and a mirror image of the previous two poor 5 Year auctions. This was the lowest yield at auction since June 2013. The internals were terrific: the Bid to Cover jumped to 2.54 from last week 2.27, the highest since May and above the 12M average of 2.42%.
But the biggest surprise was the Indirect Bid, where central bank bidders made a triumphal return, taking down a record 68.7%, 15% higher than the 53.6% in July when there appeared to be some revulsion to short-dated paper. Not this time.
And with foreigners crowding out virtually everyone else, Dealers were left with 25.1%, while Directs ended up holding 6.2% of the auction, which was perhaps the only surprise as yesterday’s Direct surge seen in the 2Y auction was not repeated.
Overall, this was a tremendous auction ahead of tomorrow’s “belly buster” 7Y, and yet another auction that suggests that at least to the primary TSY market, there is no fear that Yellen will come up with some unexpected “hawkish” surprise on Friday.
via http://ift.tt/2bAjTbK Tyler Durden