$36 Billion 5 Year Auction Prices At Lowest Yield Ever 1.374%, Indirects Take Over Half
The $36 billion 5 Year auction closed at a 1.374%, the lowest yield ever for this series. The Bid to Cover was 2.83, slightly lower than the previous 3.06 (which was a recent record), but still the second highest since 2008. Direct Bidders in this auction have declined to the lowest since January, at 8.7%, as the Indirect Bidders take down jumped to 50.8%: the first time foreign investors have been allotted more than half of the auction, again since January 2010. The obvious result is that unlike yesterday's 2 Year auction which saw Primary Dealers come to the rescue, as we have expected, foreigners continue to frontrun the Fed ever further to the right on the curve. It appears the sweet spot for foreign participation is in the 5-10 Year bound, as the Fed prepares to purchase ever more bonds of a matched duration.