After yesterday's ugly, tailing 2-Year auction, it is probably not a big surprise that today's sale of $34 billion in 5Y Treasurys was just as ugly.
The auction printed at a high yield of 2.245% - the highest since March 2011 - and well above last month's 2.066% largely thank to the recent Fed rate hike. More troubling is that the auction tailed the When Issued 2.228% by a whopping 1.7bps, the biggest tail going back at least 2 years.
The internals were also lousy, with the Bid to Cover sliding from 2.46 in November to just 2.36, the lowest since June and well below the 6 month average of 2.49. And, just like yesterday's 2Y auction, the bidside demand tumbled, with Indirects awarded only 58.4% of the final allotment, the lowest since April, and below the 66.8% 6 month average, Directs left with 7.9%, also below the 6 month auction average of 9.7%, leading to the biggest Dealer award since April, at 33.7%, 50% higher than November's 22.8%, and well above the 6 month average of 23.4%.
What is strange is that today's ugly auction priced amid a backdrop of a relentless bid for longer-dated paper, and certainly 5Y, and not even the ugly auction did much to unsettle the yield on 5Y paper which had dipped to the lowest in a week ahead of the results, and has barely budged higher after the print.