After yesterday's strong 2Y auction which saw a surge in Direct Bidders after the unexpected October plunge, rates traders were looking forward to today's sale of $40BN in 5Y paper ($1BN more than last month) to see if the Direct bidding normalization continued. It did.

Pricing at a high yield of 2.880%, today's 5Y auction priced on the screws with the When Issued trading at 2.880% at 1 pm ET. The yield was a modest drop from last month's 2.971% and the cycle high of 2.993% hit in September.

As the yield dropped, the bid to cover rose to 2.49 from 2.30 last month, and in line with the 6 auction average of 2.48.

The internals, however, were most interesting, specifically in their answer to whether the October collapse in the Direct take down to just 1.9% would rebound, and just like in the 2Y auction yesterday, it did, rising to 10.3%, above the 8.1% 6 auction average , while Indirects took down 59.9%, leaving 29.8% to Dealers.

(Click on image to enlarge)

And so the mystery of last month's plunge in Direct demand may remain unanswered, now that Direct bidders are back to taking down numbers in line with their historical average. As for the auction: steady as she goes.