Treasury 5-year auction preview: the auction should go ok
Treasury 5-year auction preview: the auction should go ok, having cheapened to 2.995%. The note is attractive on an outright basis and is some 23 bps above the August stop. An award here would the highest since the 3.00% from August 2008. But, a 3% coupon would be even more attractive, especially with more rate hikes ahead, but it's not clear it can get to that mark. The note is attractive on the curve, having narrowed to the 25 bp range, close to the flattest in over a decade. It's also trading near the tight end in the repo market. Indirect bidding is typically solid for this maturity and analysts expect such today, better than the 62.8% average, since there is a 303 bp yield pick up to the German note. The advent of month- and quarter-end ahead of the long holiday weekend could give some support. The August sale stopped at 2.765% and saw a 2.49 cover (2.49 average) and a 66.2% indirect bid (62.8% average), with direct bidders taking 9.0% and primary dealers accepting 24.7%.