Treasury's $41 B 5-year auction was strong
Treasury's $41 B 5-year auction was strong, finding a solid bid even at one of the lowest stops since late 2016. With the FOMC seen on hold and with benign inflation, the note was attractive on the curve. And there was a reportedly large short base to be covered. Foreign investors also showed hefty demand. The offering was awarded at 1.587%, tailing out marginally from the 1.584% at the bid deadline. While this is fractionally cheaper than the 1.570% stop from October, it's still the third richest award rate since October 2016. While a little cheaper than last month's rate, today's is still one of the lowest going back to late 2016. There were $102.5 B in bids for a 2.50 cover, stronger than both the prior month's 2.41 and the 2.36 average. Indeed, it's the highest since July 2018. Indirect bidders accepted 64.8%, marginally below October's 65.7%, but better than the 58.7% average. In fact, excluding October, this is the highest take since August 2018. Direct bidders took 13.5%, a little better than last month's 11.5% but just below the 15.5% average. And primary dealers were accepted 21.6%, less than the 22.8% from October, as well as the 25.8% average. It's one of the lowest in the history of this stat going back to 2003 (nadir was 17.1% from August 2017). So it looks as though the paper is in strong hands heading into the holidays.