Treasury 5-year auction outlook:
Treasury 5-year auction outlook: the $34 B issue is the second of the three legs of the $88 B package. Yesterday's 2-year sale was lackluster and average at best. It's not clear this auction will be any better. Stumbling blocks include thin trading around the Thanksgiving holiday and some uncertainty over the trajectory of Fed policy. The when issued note trades at 1.765%, about the middle of the 1.715% to 1.805% range. A stop here would be the highest since September 2014, but relatively cheap levels didn't help the 2-year much. Also, the note is not that cheap on the curve, having flattened to 120 basis points, versus nearly 140 basis points in the days following the election. Traders anticipate continued narrowing, especially if the 200-day moving average at 119 basis points is penetrated. That could be achieved fairly soon too, on month-end demand; Barclays estimates its duration index extends out a solid 0.12 years. October's auction stopped at 1.303% and garnered a slightly above par 2.49 cover (2.42 average) and a 59.7% indirect bid (59.6% average).