REFINING: Phillips Expects Distillate Margins to Remain Strong

The 5Y WI slips up to 3.872% from 3.877% earlier, 19.9bp rich to last month's stop: 4.071% high yield vs. 4.075% WI.

• US TSY 5Y AUCTION: NON-COMP BIDS $94 MLN FROM $70.000 BLN TOTAL

• Tsy futures are trading off mid-morning lows (TYU5 currently -4 at 111-17 vs. 111-11.5 low) ahead of the $70B 5Y note auction (91282CNK3) at 1300ET, WI is currently running at 3.877%, 19.4bp rich to last month's stop.
• May auction recap: reaction was positive: 5s richened about 0.5bp on the 2s5s7s butterfly, with 10Y yields down 1.4bp to 4.477%. Typically solid with the 4.071% high yield representing a 0.4bp trade-through versus the 4.075% when-issued yield at auction cutoff. Bid-cover of 2.39x - in line with the 5-auction average.
• This was the 6th 5Y auction in the last 7 to trade through with more solid peripheral statistics than usual: A record (going back to data from the early 2000s) high 78.4% takedown by indirects (seen by some as a proxy for foreign investors) was a highlight, and well up from the 69.0% prior 5-auction average.
• Primary dealers took down just 9.2% of competitives, below the 11.7% average of the prior 5 auctions, and the lowest since January 2023 - which was in turn the lowest on record (going back to the early 2000s).