Results of today’s 36 billion 5 year note auction just hit the tape to yield 1.374%. The issue had good sponsorship by Indirect Bidders (51%) but the “street” stayed away, taking only 8.7%. The auction did produce a better than average bid to cover but grew a 6 bps tail ( equivalent to a cocker spaniel). Overall, we’ll give it a B.
One thing that is of concern is that the auction was not a blow out, instead something close to average. Given the disastrous Durable Goods and Housing data this morning, many expected a buying frenzy for the issue. Matter of fact, the 10 year note has now given up all of today’s gains, currently unchanged on the day. Mortgage backs, which had brief spikes to plus 10/32’s, are now up 5/32’s. Caution is advised due to a possible worsening price change.
I think what you’re seeing here is a market that has priced in something just short of the abyss. That said, the gains on bad news are short lived and/or not nearly as potent as they have been. This is a sign that the market is topping out. Not advocating a new trend change to higher Austin mortgage rates, just a hold-steady type of market. When this kind of environment is at hand, Austin mortgage borrowers are advised to lock their Austin mortgage rates and get out of the way as the risk reward is not in your favor. More in a few.