U.S. 5-Year Auction Short Stop Is Among Biggest of Past Decade
Comment of the Day

October 27 2021

Commentary by Eoin Treacy

U.S. 5-Year Auction Short Stop Is Among Biggest of Past Decade

This article from Bloomberg may be of interest to subscribers. Here is a section:  

Wednesday’s $61b Treasury 5-year auction was among the strongest on record gauging by its yield relative to where it was trading at the bidding deadline. The auction yield of 1.157% was 2.5bp lower than the approximate pre-auction level of 1.182%, a sign that dealers underestimated investor demand for the notes. Consistent with that, the share awarded to primary dealers was among the lowest on record.

While the difference between an auction yield and the pre-auction level is always an estimate, as dealers may quote the issue differently, the last time a 5-year note auction stopped short by more than that was in November 2009; a $42 billion auction that month was awarded at 2.175%, 3.6bp below where it had been quoted moments before

Wednesday’s 17.9% primary dealer award was the third lowest on record in data since 2004, reflecting above-average shares for indirect and direct bidders

Eoin Treacy's view

Longer-dated bonds rallied in a number of countries today. That suggests investors are still willing to give the benefit of the doubt to the view that inflationary pressures are going to moderate or at the very least that yields have run away from the publicly stated intentions of central banks.  

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