- Prior was 3.980%
- 6-auction average of 3.725%.
- Bid to cover at 2.33 vs 2.29 prior
The two-year sale tailed by 0.1 bps and this one by 0.5 bps. Those aren't big misses but Treasury yields are now at the highs of the day, up 3-4 bps across the curve. We could finally be seeing some Iran war angst, though not yet in the stock market.
WTI crude was last up $2.26 to $96.65 and brent is closing in on $110. The big round numbers are likely to be the pain points in the market, and maybe in politics as well.
For background, the US Treasury funds federal borrowing by selling marketable securities — bills, notes, bonds, FRNs, and TIPS — through regularly scheduled public auctions that set the clearing yield. The 5-year note is auctioned monthly: announced in the second half of the month, sold a few business days later, and issued on the last calendar day. Bids come in two forms. Noncompetitive bids, typically from retail investors, agree to take whatever yield the auction produces. Competitive bids, dominated by primary dealers and large institutions, specify the yield the bidder is willing to accept. Treasury fills noncompetitives first, then works competitive bids from lowest yield up until the offering size is exhausted, with all winners paying the highest accepted yield (a single-price, or "Dutch," auction). The full calendar of auction sizes is laid out at the Quarterly Refunding announcement on the first Wednesday of February, May, August, and November.
5-year note auction sizes ramped sharply from late 2023 through early 2024 to fund widening deficits, then plateaued. As of the November 2025 refunding, Treasury signaled it expects to hold nominal coupon sizes steady for at least several more quarters, though it has begun preliminarily evaluating future increases.
