If yesterday's 2 Year stopping through auction was best described as "blistering", then today's $35 billion sale of 5 Year paper, which again stopped through the When Issued 1.614% by a whopping 1.9 bps, was nothing short of a scorcher.
Oddly enough, in a time when demand considerations should be sparking a lack of primary market demand for paper, investors just can't get enough "high quality" collateral - that or they are just more focused on the global slowdown and not big fans of the latest "US is decoupling" thesis - and as a result while the Dealer bid was quite possibly a record low 25.1%, it was the Indirects that stunned with their aggressive bid, taking down a record 65% of the auction, leaving just under 10% for Direct bidders. Finally, the Bid to Cover left little to the imagination: soaring from last month's paltry 2.36, it jumped to 2.91, the highest print since March. Needless to say the entire curve buckled tighter on the news, with the yield on the 10 Year printing at a day's low of only 2.279% as once again all the "economic recovery" shorts are left scrambling.
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At this rate we may run out of superlative adjectives for the upcoming 7 Year auction which will complete this week's bond issuance.
