The 5 year note auction was decent, a touch better than what was seen in the 2 year yesterday but in the context of turmoil in the European bond markets, one would have expected better. The yield was a touch above the when issued. The bid to cover of 2.75 was above the one year average of 2.51 but more in line with the average over the last 6 of 2.69. Direct and indirect bidders took a total of 63.2% of the auction, the highest since Nov ’09. The Treasury sells 7 yr paper tomorrow. Bottom line, the US Treasury market is in an interesting place where we have seen a flight to safety this week and a Fed that may keep rates low forever on one hand and an improving economy, rising commodity prices and a financial situation in the US that doesn’t look much different than Greece on the other.
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