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Mediocre Demand For 5Y Auction Amid Record Weekly Treasury Supply

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One day after the Treasury sold $124BN in 3 and 6 Month Bills and $30BN in 2Y bonds in average auctions, on Tuesday the Treasury continued its record weekly sales by unloading $24BN in 52 Week Bills and, moments ago, $35BN in 5Y notes.

Stopping at a high yield of 2.612%, the 5Y saw a dip in the yield from 2.658% one month ago and 2.44% in January; the yield also tailed the 2.609% When Issued by 0.3bps. This was the 5th consecutive tailing 5Year auction in a row.

On the other hand, the internals came in somewhat stronger than recent auctions, with the bid to cover rising from 2.44 to 2.50, and above the 6 month auction average of 2.45. Notably, Indirects took down 63.5%, a solid improvement to the 58.0% last month (just in case there is any confusion if foreign buyers are in the market), with Directs taking down 8.3%, down from 12.7% last month, leaving Dealers with 28.2% of the auction, down from 29.3% the previous month.

Overall, an average auction, however considering the record deluge of Treasury sales this week, which is just shy of $300BN, the fact that the market managed to digest the ongoing issuance with virtually no problem is more notable than the mediocre auction specifics.

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