A Treasury auction an hour before the Fed is set to announce the end of the latest (if not last) iteration of QE may not have seemed like the best idea, and sure enough moments ago the Treasury sold $35 billion in 5 Year paper in what can be described as a miserable auction, when the 1.567% high yield tailed by 1.5 bps to the 1.552% When Issued. Not only that but the Bid to Cover tumbled from 2.56 to just 2.36: this was the lowest BTC since July 2009 when it actually had a 1-handle. Finally, the less exciting internals showed that Directs were largely in line with recent auctions, taking down 10.5% of the auction, above the TTM average of 13.5%, as Indirects bought just less than half or 47.8%, leaving Dealers with 41.7% of the final allotment, slightly above the 39.3% 12 month average.
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And now, the Fed, which is doing everything in its power to bring bond yields higher but gradually and not with the volatility seen on October 15, knows that all it needs to get a disappointing auction is to have a Fed meeting just one hour later.
