Marketwatch reports Treasury’s 5-year auction disappoints bond market

The Treasury Department’s $13 billion auction of 5-year notes met with mixed demand, analysts said. The yield was 4.223%, above the 4.214% anticipated, based on trading in the “when-issued” market. The low 21.8% participation by indirect bidders, including central banks, was deemed disappointing. It’s the second lowest on record. Overall demand was better. The bid-to-cover ratio showed that $2.92 in bids were received for every $1 sold, up from $2.37 in July and the best since $3.06 in August 2000. The broader Treasury market traded lower after the auction, erasing early gains seen in relief over the Federal Reserve’s inflation assessment.

What I want to know is:

  • Exactly who was disappointed?
  • What was there to be disappointed about?

Here’s what I see:

  • Indirect bidders took a mere 21%
  • The 5-yr yield barely budged (in fact yields barely budged across the spectrum).
  • This was hardly the Armageddon that bond bears were predicting.
  • Maybe that’s who was disappointed.

I have long maintained that US demand will pick up where foreign demand leaves off.
4% rates will look rather good compared to a crashing housing and stock market.
If this is the start of a trend, then perhaps we are about to find out.

Mike Shedlock / Mish/