5-Year Supply Sees Mixed Results, Less Demand Seen

Today's supply of 5-year bonds sees mixed results. The auction's low price beat dealer expectations, which had been projected at 100.28 as per the BBG poll, but the cover ratio of 3.851x was lower than the 4.056x recorded at the previous month's auction. However, it is worth noting that November's result was the third-highest for a 5-year auction in the past 12 months.

• The tail also lengthened slightly from last month but sits in the middle of the range for the past year.
• As indicated in our preview, the current 5-year auction was occurring with an outright yield slightly above the levels seen at the early November offering and 15bps higher than last week’s low. This recent shift higher in yields was instigated by the less-than-ideal demand metrics observed in last week’s 30-year JGB auction.
• In contrast to the recent 2-, 10-, and 30-year supply, which experienced challenges in market digestion, today’s outcome stands out. However, it's important to note that while the result deviates somewhat from the prevailing trend of lacklustre demand metrics in recent JGB auctions, it falls short of presenting a convincingly robust outcome.
• The 5-year JGB is around 2.0bp richer at 0.757% after the auction. JGB futures are slightly richer in early afternoon dealings.