Wednesday's 5-year Treasury auction was a dud, with the lowest bidding this year, just a day after a successful .
The offering for $35 billion in 5-year notes drew a bid to cover of just 2.56 times, the lowest for that maturity since December. The auction went off at a yield of 1.8 percent, the highest since May 2011.
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Direct bidders took just 8.8 percent, versus a 14 percent average, and dealers were awarded 41 percent, compared with the 35 percent average of the last four auctions.
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"It's interesting what a a difference a day makes. The 2-year was well received," said Adrian Miller, director of fixed income strategy at GMP Securities. "The difference is the 2-year speaks to when the hikes begin and the 5-year speaks to how fast rates are going to rise. It looks like the bond market is probably more concerned about the pace of the rate hikes than as to when they start … and that's what weighed on the 5-year. "
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Treasurys held the price action, after the auction. The Treasury auctions $29 billion in 7-year notes Thursday.