Here They Come: Record Foreign Demand, Soaring Bit To Cover In Blockbuster 5 Year Auction
By Tyler Durden
One didn’t have to be a rocket surgeon to predict that today’s 5Y auction would be strong, simply by looking at the 5Y trading super special in repo this morning, as low as a record -2.00% as shown in the chart below.
However, it wasn’t just the technicals: moments ago the Treasury sold $34 billion in 5 Year Notes (Cusip U81) in what can only be described as a blockbuster auction.
The High Yield printed at 2.057%, stropping through the When Issued by a whopping 1.2bps, the most since February 2016. The Bid to Cover was just as impressive, and at 2.72, this was the highest since November 2014.
But the most remarkable feature of today’s auction was the foreign demand: at 71.4% for Indirect Bidders (with 24.5% for Dealers and 4.1% for Directs), this was the highest foreign central bank and official buyer take down on record, and confirms what we reported on Friday when looking at the Fed’s custody holdings of Treasuries…
… namely that foreign buyers are finally back, and back with a vengeance. This was just confirmed at least when it comes to paper located in “No Man’s Land.”
For definitive proof that foreigners are now rushing into Treasuries, however, wait for tomorrow’s 7 Year “Belly” auction. If Indirects just can’t get enough, those record Treasury shorts are about to get very nervous.
Source: Here They Come: Record Foreign Demand, Soaring Bit To Cover In Blockbuster 5 Year Auction
