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Dismal Demand For Ugly, Tailing 5Y Auction

Courtesy of ZeroHedge. View original post here.

One day after a ugly 2Y auction priced with the first tail for 2019, moments ago the US Treasury sold $41 billion in 5Y paper in an auction that was even uglier.

The high yield printed at 1.824%, above the 1.791% in June and a 1bp tail to the 1.814% When Issued, the biggest tail since March. The bid to cover slumped from 2.35 to 2.26, far below the 2.39 six auction average, and the lowest bid to cover since December 2018.

The internals were just as ugly: Indirect demand slumped, with the takedown for foreign official investors dropping to just 53.4%, not only far below the 6 auction average of 58.8%, but the lowest since December 2015. And with Directs also showing little enthusiasm for today's auction, taking down just 13.7%, or the least since December, that left Dealers holding 32.9% of the final allotment, the most since December.

Overall, and just like yesterday's 2Y auction, another very subpar auction in every aspect, which however is surprising considering that it is certainly the market's consensus that a recession will take place some time in 2020, and as such the yield on short-dated paper should only continue to slide. Unless of course, foreign investors have better things to do with their money, even as Dealer holdings of Treasurys continue to surge.


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