US government’s 5-year auction fails to meet expectations for 15th consecutive time

The US Treasury just notched an unwanted record of sorts. Its latest 5-year note auction, a $70 billion offering, cleared at a high yield of 4.393%, landing 0.2 basis points above the when-issued level of 4.391%. That makes it 15 consecutive 5-year auctions that have failed to “stop through,” meaning buyers aren’t willing to accept lower yields than the pre-auction market implied. In Treasury-speak, a positive tail means the government had to pay more than expected to move its debt. Inside the numbers The bid-to-cover ratio came in at 2.37x, slightly above the recent average. Direct bidders, which include domestic institutions buying for their own accounts, punched above their weight at 28.4% of total participation. That’s well north of their 21.2% recent average. Indirect bidders, a category that captures foreign central banks and international money managers, took 61.5% of the auction. That figure sits below their 65.4% average. American buyers stepped in to fill a gap that international demand left open. Market observers graded the auction a B. A streak with context This auction landed on the same day as the Q2 GDP second estimate and July PCE data, giving bond traders competing...