Stock Market News: Dow Is Falling
An auction holding $70 billion Treasury notes that expire in 5 years saw good demand from traders, despite the sale’s size.
Wednesday’s auction—which was the largest ever, according to Treasury Department data—was awarded a 4.659% in yield, higher than the average yield of 4.288% seen over the past six auctions during which a new 5-year debt was issued. The yield was also 0.4 basis points higher than the one awarded by the pre-bidding deadline.
These metrics suggest the auction was weak, as it suggests the government had to entice investors with a premium, above-market yield to buy its debt. That’s a premature assessment.
The 5-year auction saw dealers take 15% of the supply, versus the average of 16.7%. Direct bidders, such as hedge funds, mutual funds, and other institutions, claimed 19.2% of the supply versus the 17.9% norm.
These numbers indicate “today’s 5-year auction saw good demand,” according to BMO’s analyst Vail Hartman
Investors have been paying attention to auctions since the Treasury Department increased the size of the debt it was offering late last year. However, some Wall Street analysts are doubting if investors can absorb all this debt.
Though the 2-year note auction went well on Tuesday, the latest 10-year bond sale, a key auction, held earlier this month, was weak—suggesting investors are reluctant to buy debt that won’t mature for many years.
Next up: Markets will digest the sale of 7-year notes, with the auction slated for Thursday.