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5 Year Bond Auction With Highest Yield For 2015 Leads To Strong Demand, Jump In Direct Bidders

Tyler Durden's picture




 

A day after the 2 Year auction surprised with solid demand all around, moments ago the US Treasury issued $35 billion in 5 Year paper which also came stronger than some had expected, pricing at a yield of 1.56%, 0.6 bps through the 1.566% When Issued. Like in yesterday's auction, the yield was the highest of 2015. The Bid To Cover dipped modestly, dwon from 2.56 to 2.46, and in line with the 2.47 average.

The internals were more interesting, with Dealers taking down 31.6%, the least since January, while Directs ended up with 10% of the takedown, the most for this class since October. That left 58.5% to Indirect buyers, i.e., foreign central banks, who are apparently unaware they should not fight the Fed which is doing all it can to push yields across the curve higher.

In short: another better than expected auction in a world in which for all the rhetoric and posturing, when it comes to "high quality", repoable collateral, nothing can surpass US paper, if only for now.

 

 

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Wed, 05/27/2015 - 13:20 | 6136734 fremannx
fremannx's picture

In short: another better than expected auction in a world in which for all the rhetoric and posturing, when it comes to "high quality", repoable collateral, nothing can surpass US paper, if only for now.

Yields will continue to move higher as deflationary depression pushes prices lower... the dollar will continue upward, not simply because it will be seen as the safest haven available, but because most of the world's debt is denominated in dollars. In deflationary periods people, businesses and governments all try to pay down their debts --- until they come to the reality that it's impossible to do so.

10 YR UST

http://www.globaldeflationnews.com/10-year-u-s-treasury-index-yieldellio...

USD

http://www.globaldeflationnews.com/u-s-dollar-indexelliott-wave-update-f...

Wed, 05/27/2015 - 13:29 | 6136764 Headbanger
Headbanger's picture

Moar like the reality the US is becoming the next Greece.

Wed, 05/27/2015 - 14:01 | 6136890 thepigman
thepigman's picture

Methinks the E-wavers will be wrong about rising yields for a very long time yet.

Wed, 05/27/2015 - 15:23 | 6137266 fremannx
fremannx's picture

E-waves aside, very few people understand what happens in a deflationary environment. The prices of everything falls; stocks, bonds, futures, commodities, real estate. Prices and yields move in opposite directions which means you have to believe bond prices will rise during a deflationary depression. I think of it this way...

http://www.globaldeflationnews.com/inflation-vs-deflation-part-1which-on...

Wed, 05/27/2015 - 13:29 | 6136763 thunderchief
thunderchief's picture

Like throwing bread to pigeons.   Add some chunks of soap in and they all go belly up.

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