Following yesterday's uninspiring 2 Year bond auction, today's 5 Year issuance of $35 billion was a whopper. Because while it was known well in advance that today's closing high yield of 1.715%, which priced through the When Issued of 1.732% by 1.7 bps, would be the highest since May 2011. However, the stunners were all within the internals. First, the Bid To Cover of 2.99 was the highest since September 2012, and an abrupt turn in the recent general downward trend in BTCs - who would have thunk that all it took for greater interest in US paper was higher yields . But it was the takedown where the real shockers lay.
To wit, while Directs were awarded 23.1% of the final allotment, the third highest ever, and below the 23.3% last seen in May of 2013, it was the surge in Indirects, which rose to an all time high of 50.9%, well above the 45.2% TTM average, meaning Dealers in turn had the lowest allotment on record as well, getting just 25.9% of the final auction which could make future monetization of this CUSIP by the Fed problematic. Altogether a great auction, even if PIMCO, which had been buying the 5 Year in recent months has gotten creamed on the snapback wider in the bucket, where as reported previously, the 5s30s curve is the flattest it has been in ages.