One day after the Treasury sold a record amount of 2Y paper at the second lowest yield on record, moments ago it repeated this exercise when a record $55 billion in 5Y notes were just auctioned off, pricing at a yield of just 0.33% (0.5bps below the 0.335% When Issued) and which was just 5.5bps above the record auction low hit last month at 0.275%. Considering the slide in yields today on the back of the rout in risk assets, one may have expected an even lower yield.

And in keeping with yesterday’s 2Y auction, the size of the auction rose from $53 billion to an all time high of $55 billion.

The other metrics of the auction were forgettable: the Bid to Cover sliding from 2.52 to 2.38, below the six-auction average of 2.53%. The internals were almost identical to last month, with the Indirects unchanged at 61.9% (above the 61.1% recent average), and with Directs taking down 14.0% or just below the 15.4% recent average, Dealers were left holding 24.1%, above the 20.7% in September and the 23.5% six month average.

In summary, the recent trend remains in line – ever bigger auctions (the $55BN auction size was more than 50% higher than the auction sizes for much of the past decade), at ever lower yields, all of which has been made possible by the Fed’s backstopping of yields and forcing of investors into those same risky assets that are crashing today.



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