$35 Billion Sold In Weak, Tailing 5 Year Auction

If yesterday's 2 Year auction was surprising strong, then the week's second, today 5 Year auction which concluded moments ago, was the very opposite, and can only be described as weak: at a high yield of 1.80%, this was not only the highest yield since May 2011, it was also a notable 0.7 bps tail to the 1.793% When Issued. The internals were just as messy, with the Bid to Cover sliding to 2.56, far below the recent average of about 2.80, and the lowest since December 2013. And with Directs taking down just 8.8% of the auction, or the lowest since July 2013, it meant that with Indirects left holding 50.3% or roughly in line with the average, that Dealers were left holding 41.0% or the most since January. In short, while there is still significant demand for paper at current rates left of the 5 Year spot, the further one goes into the belly, the weaker things start to get. Tomorrow's last of the week 7 Year auction should confirm if the weakness in today's 5 Year was a fluke or the most recent start of a trend wider in the primary market.