One day after the US sold $52 billion in 2Y paper in a stellar auction which saw a record low dealer takedown, moments ago the Treasury concluded today's 5Y auction which was a carbon copy of yesterday's sale, including not just stellar demand - no doubt a result of the continued flight to safety as stocks are once again hit hard, but also the bond trading special in repo indicating a big short overhang in futures which will be covered - but a second consecutive record low dealer allotment.
Pricing with a high yield of 1.880%, the auction stopped 0.1bps through the When Issued 1.881%, and the yield was the highest since May 2019 (not to mention, well above last month's 1.533%).
The bid to cover was 2.49, fractionally below last month's 2.50 but above the six-auction average of 2.42.
The internals, however, were most remarkable and virtually identical to yesterday, as a result of a continued surge in Indirect demand, as foreign bidders took down 67.81% of the final auction, just below last month's record 68.72%, and one of the highest on record. And with Directs taking down 18.4%, Dealers were left holding just 13.8% of the final allotment, the lowest on record similar to yesterday's record low 2Y Dealer takedown.
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Overall, another remarkably strong auction with impressive foreign demand, and hardly an indication that the market is sweating the "9 consecutive rate hikes" which JPMorgan now envisions.
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