In the second of the week's coupon auction, the Treasury sold $35 billion in 5Year notes at a yield of 2.658%, right on the screws with the When Issued, and the highest yield going back to December 2009.

Similar to yesterday's 2Y auction, the internals showed some weakness - which is to be expected in a week of record supply - but certainly failed to suggest a notable lack of demand, even if the Bid to Cover dipped modestly from 2.48 in January to 2.44, below the 6 auction average of 2.47.

The closely watched Indirects were awarded 58% of the takedown, a drop from last month's 65% and below the 64.9% 6 month average; Directs ended up holding 12.9%, perhaps as Pimco stepped up in line with earlier comments, above January's 9.1%, and above the 6MMA of 10%. This left Dealers with 29.3% of the auction, modestly above January's 26.0% and above the 6 auction average of 25.1%.

Overall, a somewhat mediocre effort which leaves tomorrow's 7Y as the auction to watch, especially after today's FOMC minutes which may well surprise on the hawkish side, potentially leading to even further weakness.