US treasury auctions off $70 billion of 5-year notes at a high yield of 4.138%

• High yield 4.138

• WI yield st the time of the auction 4.122

• Tail 1.6 basis point 6-auction avg. 0.5bps

• Bid-to-Cover 2.39X vs 6-auction avg. 2.37x

• Dealers 14.2% vs 6-auction avg. 14.4%

• Directs (a measure of domestic demand) 9.50% vs. 6-auction avg. 17.6%

• Indirects (a measure of international demand) 76.4% vs 6-auction avg. 68.0%

AUCTION GRADE: C-

Overview: The five year note auction had a larger than average sale of 1.6 basis points indicative of sluggish demand. THe bid to cover was near the average.

Looking at the buyers, domestic demand was very week at only 9.5% versus 17.6% average. However, the international demand was much better than expected at 76.4% versus 68.0%. The problem, is that the buyers were not that aggressive relative to the WI level.