US Treasury Sells $70 Billion in 5-Year Notes at 4.845% With Modest Tail

The U.S. Treasury sold $70 billion in 5-year notes on October 27 at a high yield of 4.845%, down sharply from the prior auction's 5.033% and representing a 0.4 basis point tail above the 4.841% when-issued yield at the bidding deadline. The tail signals that demand was not quite strong enough to price the notes at pre-auction levels, prompting one market commentator to characterize the result as mediocre.

Despite the soft pricing, the underlying demand metrics improved. The bid-to-cover ratio rose to 2.33 from 2.21 at the prior auction, and indirect bidders, typically a proxy for foreign and institutional demand, took 60.0% of the offering, up from 54.3% previously. Direct bidders accepted 29.4%, roughly in line with the prior 29.9%, while primary dealers were left holding 10.6% of the sale.