5Y Auction Tails Despite Jump In Foreign Demand, Yields Hit Session High

After a mediocre 2Y auction to start the week’s coupon issuance this morning, moments ago the Treasury sold 5Y notes in another average auction.

The sale of $70BN in 5 Year paper stopped at a high yield of 3.955%, down fractionally from 3.980% last month, and tailing the When Issued 3.950% by 0.5bps. This was an improvement from last month’s 1.4bps tail, but more concerningly this was the 11th tail in a row for 5Y issues.

The bid to cover was also on the muted side, at 2.330, up from 2.287, it was below the six-auction average of 2.348. 

The internals improved notably, however, with Indirects awarded 72.3%, above last month’s 61.9% and also well above the recent average of 62.1%. In fact this was the highest award for foreign buyers since May 2025. And with Directs dropping to 15.03%, Dealers were left with just 12.7%, the lowest since January.

Overall, this was a stronger auction than this morning’s 2Y sale thanks to the surge in foreign buyers, which probably offset concerns about the 11th tail in a row. Even so, 10Y yields have pushed to session highs, rising above 4.34% although that’s due to the continued rise in oil which remains the only thing that the bond market is focused on for now.