After yesterday’s weak 2 yr auction, today’s 5 yr was poor. The yield of 4.228% was almost 3 bps above the when issued pricing. The bid to cover of 2.27 was well below the one yr average of 2.42. Also, dealers got stuck with the 2nd highest percentage of a 5 yr auction this year.
Bottom line, what’s amazing and concerning at the same time is that 5 yr yield at the highest level in 15 yrs, and up from 1.21% at the beginning of 2022, is not bringing out more demand. Of course already, the market has already lost a buyer via QT (although they are only buying in the secondary market) at the same time the Treasury has a lot of paper to sell. The 5 yr yield is just off its high of the day in response. The 10 yr is on the doorstep of 4%.
5 yr yield