If yesterday’s 2 Year auction was largely blah, today’s issuance of $15 billion in 5 year bonds can only be described as blistering. While the high yield of 1.53% was strong enough to stop through the 1.538% When Issued, and the lowest since November’s 1.34%, it was the Bid to Cover that showed just how much demand there was for paper, as 2.98 dollars in tendered bids were waiting for every dollar of allocation: this was the highest Bid to Cover since September 2012 and well above the 2.62 TTM average. This outlier print snapped the recent trend of declining BTCs and showed that when it comes to Bill Gross once favorite spot on the curve, there is no lack of demand, especially from foreigners, who took down 50.7% of the allotment, the highest since July and solidly above the 44.5% average. On the other hand, Directs who lately are hardly the best friends of the Dealer community, took down only 9.2%, the lowest also since July, leaving 40.2% for the dealers.
In summary: if there is any indication of an ongoing great rotation from demand for bonds to stocks, don’t for it here.