Intraday Inversion: 5Y Treasury Prices At Lower Yield Than 2Y Auction Hours Earlier

Today is a memorable day for bond traders: for the first time in years, there were two auctions within 2 hours of each other which came in... inverted.

Following the earlier 2Y auction which as we reported came in surprisingly weak on the Indirect side, with foreign buyers tumbling, at 1pm the Treasury sold $41 billion in 5Y notes in a relatively strong auction.

The high yield of 2.489% stopped through the When Issued of 2.491% by 0.2 bps and was the lowest since January 2019; However, what was remarkable is that the 5Y yield came in lower than the 2Y yield auction which concluded earlier, and which as we noted at the time, stopped at 2.503%, or more than 1 basis point of inversion.

The internals were less exciting, with the Bid to Cover virtually unchanged from January's 2.41, printing at 2.40, just above the 2.36 six auction average. There were fewer fireworks in terms of demand, with Indirects taking down 57.7%, which while weaker than last month's 60.2% and below the 59.5% average, was not nearly as sharp a drop as that observed during the 2Y auction Indirect plunge. Elsewhere, Dealers took down just 19.8%, which was the lowest since August 2017, leaving Directs holding 22.5%, the highest since July 2014 when Directs took down 25.9%.

So overall, a stronger auction than today's 2Y sale, but again the most memorable consequence is that on the day we had a 2Y and 5Y auction, the two priced inverted, continuing to indicate that nothing in the economy is as well as soaring stocks would make it.