US treasury auctions off $70 billion of 5-year notes at a high yield of 4.071% ...Middle East

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High-yield 4.071%WI level at the time of the auction 4.075%Tail -0.4 basis points vs six month average of -0.5 basis pointsBid to cover 2.39X vs six month average of 2.4XDirects (measure of domestic demand) 12.4% vs six month average of 20.2%Indirects (measure of international demand) and the 78.4% vs six month average of 68.2%Dealers 9.24% versus six month average of 11.6%

High Yield: 4.071% vs WI 4.075%

Positive: The auction cleared slightly through the when-issued level, indicating investors were willing to accept a slightly lower yield than expected—a mild sign of strong demand.

Neutral: Just a tick below average, suggesting solid but not standout demand.

Negative: Domestic real-money interest was notably below average, which is a concern and weighs on the grade.

Strong Positive: This is the standout metric. International demand (often foreign central banks or large institutions) was well above average, offsetting the weakness in direct bids.

Positive: Dealers were left with less than average, a good sign that end-user demand (especially from indirects) was strong.

Positives: Strong foreign demand, better-than-market clearing yield, below-average dealer burden.

Negative: Weak domestic direct bidding.

This auction showed healthy demand overall, anchored by strong international interest and minimal dealer exposure. While domestic direct participation was soft, it was more than offset by the high indirect bids. The slight negative tail and average bid-to-cover keep it from being an A-tier auction, but overall performance was solid.

This article was written by Greg Michalowski at www.forexlive.com.

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