Bid To Cover Spikes To 17 Month High In Blistering 5 Year Bond Auction

Tyler Durden's picture

If yesterday's 2 Year auction was largely blah, today's issuance of $15 billion in 5 year bonds can only be described as blistering. While the high yield of 1.53% was strong enough to stop through the 1.538% When Issued, and the lowest since November's 1.34%, it was the Bid to Cover that showed just how much demand there was for paper, as 2.98 dollars in tendered bids were waiting for every dollar of allocation: this was the highest Bid to Cover since September 2012 and well above the 2.62 TTM average. This outlier print snapped the recent trend of declining BTCs and showed that when it comes to Bill Gross once favorite spot on the curve, there is no lack of demand, especially from foreigners, who took down 50.7% of the allotment, the highest since July and solidly above the 44.5% average. On the other hand, Directs who lately are hardly the best friends of the Dealer community, took down only 9.2%, the lowest also since July, leaving 40.2% for the dealers.

In summary: if there is any indication of an ongoing great rotation from demand for bonds to stocks, don't for it here.

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Kreditanstalt's picture

SOMEONE, fundamentally irrationally, desperately needs yield denominated in paper fiat dollars and absolutely loves this paper...which is why I'll stick with the metal.

Dumpster Fire's picture

Does this mean we're saved?

buzzsaw99's picture

if the fed keeps tapering all year it will get interesting at some point

Gringo Viejo's picture

Paper chasing paper. lmao. One day it's going to end badly.

RSloane's picture

You might have meant that kiddingly, but that's exactly what it is. The paper doing the chasing is in every fiat currency imagineable. Part of the value of the paper being chased is comprised of the value of that chasing currency. In this manner you have a lot of valued paper chasing other valued paper with zero ability of any of that paper benefiting anything but those in the loop.

Boston's picture

It wouldn't be surprising to see a return back below 2.0% on the 10yr and below 1.0% on the 5yr. All it would take is a trigger---any trigger---for risk-off to grip the markets.

asteroids's picture

5yrs@1.5% what a great investment!

Boston's picture

What if the 5yr yield fell from 1.5% to 1.0% over the next 3-6 months? What a great trade!

mutty's picture

Right. I loaded up on 5 years at 1.7% with the intention of riding the yield curve down to 2.5 yrs. Sell at a gain.

our system is currently based on free fed money. I don't see how they can afford to stop giving it away [to the govt, for example].

pretty simple way to safely bank capital reserves.

thamnosma's picture

Makes sense.  Each taper causes more currency instability in the emerging markets and third world countries, thus driving the foreign money back into US paper, keeping US bond prices high and our inflation "low".  More than anything, TPTB are terrified of interest rate increases and the inability to service US government debt.