The 5 year note auction was mixed as the yield was slightly above the when issued but the bid to cover at 2.75 is the 3rd highest dating back to Sept ’07 and is above the average over the past year of 2.38. Indirect bidders took 40.3% of the auction which is the lowest since July but direct bidders bought 12.8% of it which is on the very high side. The dealer community is thus being put a bit more in the dark over what the true demand is and where its coming from. Today’s auction follows an excellent 2 yr note auction yesterday and the maturity of 5 years falls somewhat in no man’s land this week ahead of tomorrow’s 7 year auction and this past Monday’s 30 yr TIPS auction. Therefore, not much can be gleaned today in terms of what the bond market sentiment is with respect to growth, inflation and risk appetite.
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