Yields Plunge, Stocks Soar After 5Y Auction Stops Through Most Since May

With yields tumbling for reasons not exactly known all morning, and pushing the 10Y from 3.90% to 3.82% ahead of today's final for 2023 5Y auction, moments ago the Treasury announced the results of today's $58BN 5Y auction, which contrary to expectations for a tail (due to the zero concession), stopped through mightily pricing at a yield of 3.801%, which was not 61bps below November's 4.425% and a whopping 107bps below the October auction (which priced at 4.880%), but also stopped through the When Issued 3.815% by a whopping 1.4bps, tied for the biggest stop through since May (the January 2023 was "tailier" at 2.4bps).

The bid to cover rose to 2.50 from 2.46 (and well above the 2.36 in October), tied with the 6-auction average also at 2.50.

The internals were even more solid, with Indirects taking down 70.6%, the highest allocation to foreign buyers since September's 71.2%. And with Directs awarded 15.4%, or the lowest since Dec 2021, Dealers were left holding 14.0%, the lowest since Sept.

The auction results sent 10Y yields sharply lower, sliding below 3.80%, and well below where the 10Y paper started the year...

... and with yields tumbling, stocks didn't think twice about what this means for the future (surely not a recession but merely a soft landing) and spoos surged to fresh 2023 highs and now just a hair away from new all tim ehighs.

The good news for bond buyers - who clearly can't get enough of the same bonds that everyone shunned just two months ago - is that there is be an avalanche of supply on deck, and while nobody is paying attention today, in a few days the biggest topic of discussion will be that US debt has jumped above $34 trillion in just a few months.... and is on pace to hit $40 trillion within a few years, if not less.