Unlike yesterday’s 2Y auction, when paper was trading -1.0% special in repo which helped yesterday’s issuance to pass with the high yield printing through the WI, today’s 5Y auction did not have the added benefit of a short squeeze going into the 1pm deadline (5Y was trading just -0.1% in repo), and as such we were not surprised to see the high yield print at 1.129%, tailing the 1.128% When Issued by a marginal 0.1 bps. Putting this in context, it was the second lowest 5Y auction yield since June 2013, with the exception only of last month’s auction pricing at 1.25%
The bid to cover of 2.39 dipped from last month’s 2.54, but was in line with the recent range, just below the 6MMA of 2.41.
The internals also deteriorated from last month’s auction, with Directs taking down only 4.4% down from last month’s 6.2% and below the 6.7% average, Indirects were left with 61.4%, also in line with the 6 month average, if lower than last month’s 68.7%, while Dealers were left with 34.1% of the final takedown.
Overall, an uneventful auction which had no impact on pricing for teh 5Y bucket after the deadline, however the 30Y has continued to rally, which in turn has pushed the curve somewhat flatter, as the 5s30s spread now declines to 116.1 bps, not helping the global central banks’ attempts for a coordinated curve steepening.
via http://ift.tt/2dwXZYu Tyler Durden