Today's $55B 5Y Note (CUSIP: 91282CJN2) auction at 1300ET/1800UK - following on from the biggest 2Y auction tail since May - comes as 5s have been a key beneficiary of softer economic data and deepening Fed cut pricing.
- The current prevailing when-issued yield (4.43% per BBG data) is nearly 50bp below October's high yield (which was the highest at auction since 2007), and just above August's auction.
- The October 25th 5Y auction was the weakest of the year, tailing by 1.7bp on a high yield of 4.899% alongside poor peripheral statistics (the bid-cover of 2.36x and primary dealer takeup of 19.41% were respectively the lowest/highest of 2023).
- Prior to October, September's sale traded through solidly (1.3bp), with August's "on the screws".
- From a relative value perspective: 5s have been outperforming and are trading richer to the curve since the Oct 25th auction: the 2s-5s-10s is fly is last -45bp (vs -30bp a month ago); 2s-5s-7s is -49bp (vs -32bp a month ago). 2s5s had bull flattened to -47bp (going into the 2Y auction), vs -29bp going into 5Y auction day last month.
- The 5-auction average bid-cover ratio is 2.51x, with average primary dealer takeup 14.03%/indirects 66.61%/directs 19.36%.
| 5-Auction Avg | High yield | When-issued yield | Trade through (tail) | High - Median Spread | Bid-to-cover | Primary Dealer Percent | Indirect Percent | Direct Percent | Offering Amount |
| 4.429% | 4.426% | -0.3 | 7.0 | 2.51 | 14.03% | 66.61% | 19.36% | 46.6 | |
| 25-Oct-23 | 4.899% | 4.882% | -1.7 | 8.0 | 2.36 | 19.41% | 61.51% | 19.08% | 52 |
| 27-Sep-23 | 4.659% | 4.672% | 1.3 | 6.0 | 2.52 | 11.23% | 71.15% | 17.62% | 49 |
| 28-Aug-23 | 4.400% | 4.400% | 0.0 | 7.0 | 2.54 | 13.83% | 67.92% | 18.25% | 46 |
| 25-Jul-23 | 4.170% | 4.166% | -0.4 | 7.0 | 2.60 | 13.49% | 64.38% | 22.13% | 43 |
| 27-Jun-23 | 4.019% | 4.012% | -0.7 | 6.9 | 2.52 | 12.21% | 68.10% | 19.69% | 43 |
