After yesterday's ugly 2Y auction, which many had expected would come in far stronger than it actually did, bond pundits were not excited about the prospects of today's $43 billion 5Y auction. Of course, that's probably why the just concluded sale of 5Y paper was one of the strongest ones this year.

The high yield of 4.192% not only stopped through the When Issued 4.210% by 1.8bps, the first stop through since July, and the biggest one since October 2021, but was also the first time a 5Y auction has yielded less than the prior month (September was 4.202%) since July.

The Bid to Cover, unexpectedly surged from 2.27 to 2.48, the highest since March, and clearly well above the 6-auction average.

The internals were also solid with foreign buyers (i.e., Indirects) taking down 67.8%, the most since January 2022 (when it was 68.72%). And with Directs awarded just 15.6%, the lowest since Dec 2021, meant that Dealers were left with 16.5%, the lowest since April 2022.

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Overall, this was an unexpectedly impressive 5Y auction and one which sent yields across the curve even lower on the day, with the 10Y straddling 4.000% as of 1:15 pm.

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