Demand Tumbles For 5Y Treasuries As Tailing Auction Leads To Highest Yield Since 2011

After yesterday's ugly, tailing 2-Year auction, it is probably not a big surprise that today's sale of $34 billion in 5Y Treasurys was just as ugly.

The auction printed at a high yield of 2.245% - the highest since March 2011 - and well above last month's 2.066% largely thank to the recent Fed rate hike. More troubling is that the auction tailed the When Issued 2.228% by a whopping 1.7bps, the biggest tail going back at least 2 years.

The internals were also lousy, with the Bid to Cover sliding from 2.46 in November to just 2.36, the lowest since June and well below the 6 month average of 2.49. And, just like yesterday's 2Y auction, the bidside demand tumbled, with Indirects awarded only 58.4% of the final allotment, the lowest since April, and below the 66.8% 6 month average, Directs left with 7.9%, also below the 6 month auction average of 9.7%, leading to the biggest Dealer award since April, at 33.7%, 50% higher than November's 22.8%, and well above the 6 month average of 23.4%.

What is strange is that today's ugly auction priced amid a backdrop of a relentless bid for longer-dated paper, and certainly 5Y, and not even the ugly auction did much to unsettle the yield on 5Y paper which had dipped to the lowest in a week ahead of the results, and has barely budged higher after the print.


zzzz88 Wed, 12/27/2017 - 14:18 Permalink

no one denied that this is a manmade everything everywhere every cycle bubble. central banks keep it going for almost 10 years. but the turning point is here--market can not acknoledge the central bank rate anymore. in usa and china, many borrowed money at a much much much higher rate than the central bank rate. this will force the interest rates go higher and higher, no matter central banks want it or not. so the bubble game is ending sooner than most imaged. 

earleflorida Wed, 12/27/2017 - 14:19 Permalink

trump's tax package coudn't have come at a moar opportune tymetight money comin as inflation is picking up steamdays of easy 1% debt is gonzo!corp's gotta balance their own books with profits (not on cheap debt)not a good scenario for late 2018tax holiday in the cards!?!

Atomizer Wed, 12/27/2017 - 14:51 Permalink

7 year is the trigger for housing bubble. Watch the auctions. One more house to sell in cesspool of Cuyahoga County in Cleveland, OH. We my jump break even, although it's zero mortgage purchased two years ago. It a fucking liberal train wreck in Strongsville Ohio. Sell and run with the money. Problem, expensive home. Mrs Atomizer is freaking out. Shipped up Mark LT. 4x4 for snow safety. Her exact words, everyone is looking at truck and offering her to purchase it. She wants to purchase a junk car and ship Lincoln back south. I said no, you need 4 wheel drive. Snow  This is what liberals do. intimate. I don't want a junk car in snow to endanger her. I love her so much. Explained, people will approach you on high end cars to purchase, just say.. not interested. She gets scared. I defuse the problem. Well seasoned on this bullshit. 60% negros, 40% white. She doesn't drive them often, doesn't understand how to handle approachment. Schooling her. We have a peasant car. She wants it shipped to Ohio. I said no.Just like sleeper M5 BMW car we have, she wants our dedicated peasant car shipped up to blend in with Strongsville liberal assholes. Absolutely not, Mrs Atomizer is going to deal with 4x4. She is flying down next month. Warmer weather.