Lack Of Demand Greets Sale Of 5 Year Treasuries In Another Tailing Auction

Tyler Durden's picture

In light of today's Treasury market weakness, and yesterday's poor 2 Year auction, many strategists had expected today's sale of $34 billion in 5 Year paper to tail, with Credit Agricole saying they were “Not enthusiastic” based on results of 2Y auction yesterday, as the 2Y auction “quite often” a signal for 5Y results adding that the 5Y “suffers from the flatness of the 3-5Y spread” and primary dealer balance sheets “heavy with off-the-run paper” in sector. BMO added that the tail was likely based on poor seasonals and “significant event risk,” namely next week’s FOMC and BOJ statements; Fed hawks are “likely to get louder as we get closer to December.” It also noted that the 5Y auction has tailed in October in 5 of past 6 years.

Well, the negative sentiment was spot on, and moments ago the Treasury announced that today's auction of 5Y paper indeed tailed, printing at 1.303%, tailling by 0.1bps. This was the highest yield since May of 2016 when the same paper priced at 1.395%. 

The internals were also depressed, with Indirects taking down 59.7%, below last month's 61.4%, and below the 6MMA of 61.8%. Directs took down 4.9%, below the average of of 6.2%, and leaving Dealers with 35.4% of the auction, notably above the 6 month average of 31.9%.

Overall, a poor auction, one which is likely to lead to result in another less than "stellar" auction when the Treasury sells 7 Year paper tomorrow.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
youngman's picture

Well someone here said the Chinese are selling our they probably are not buying it either...I would not either

KnuckleDragger-X's picture

Just needs a sprinkle of fairy dust, and a little Yellen urine and it'll be just fine......

Quantum Bunk's picture

Why  use the gay Fed keynesian lingo Tyler ?  "Tailing" "Tail risk"

Consuelo's picture



"Fed hawks are “likely to get louder as we get closer to December."




When does someone put the LIE to this horsehit charade...?

KnuckleDragger-X's picture

They aren't lying, they are using an alternate truth imported from the twilight zone.....