US sells 5-year notes at 4.182% vs 4.181% WI
- Prior was 3.955%
- Bid to cover at 2.34 vs 2.33 prior
- Primary Dealers 12.8%
- Direct 12.3%
- Indirect 74.9%
A negligible tail of 0.1 bps. Treasury yields have been falling steadily since the May 19 highs. The optimism regarding a US-Iran deal helped ease inflation concerns as it also contributed to lower oil prices. Nevertheless, an agreement has not been reached yet and the Strait of Hormuz remains closed.
For background, the US Treasury funds federal borrowing by selling marketable securities, bills, notes, bonds, FRNs, and TIPS, through regularly scheduled public auctions that set the clearing yield. The 5-year note is auctioned monthly: announced in the second half of the month, sold a few business days later, and issued on the last calendar day. Bids come in two forms. Noncompetitive bids, typically from retail investors, agree to take whatever yield the auction produces. Competitive bids, dominated by primary dealers and large institutions, specify the yield the bidder is willing to accept. Treasury fills non-competitives first, then works competitive bids from lowest yield up until the offering size is exhausted, with all winners paying the highest accepted yield (a single-price, or “Dutch," auction). The full calendar of auction sizes is laid out at the Quarterly Refunding announcement on the first Wednesday of February, May, August, and November.
This article was written by Giuseppe Dellamotta at investinglive.com.