Treasury just sold $38 billion 5-year notes. It did not go well...

The high yield was 1.995%, this is well above the 1pm "When Issued" yield which tells us the market viewed the issue as being too expensive relative to the low coupon yield. Backing up that observation was a below average bid to cover ratio of 2.58 bids submitted for every 1 accepted by TSY.

In a complete role reversal from the 2-year note auction yesterday...primary dealers had to carry the debt load today, taking home 54.8% of the total auction and 29.8% of what they bid on. Both metrics are well above average.

Direct bidders were awarded a below average 10.7% of the auction and 39.2% of what they bid on. Indirects buyers were the weakest link, adding 34.6% of the competitive bid and 78.1% of what they bid on. It's never a good sign when direct and indirect buyers only account for 45.3% of the total award.

This was a brutal auction! Blame the flight to safety yesterday...this issue was too expensive!

Stocks ticked off of intraday lows as rates bounced higher after the auction results were released. The August Fannie Mae 4.5 MBS coupon lost 4 ticks in price after the results. This is the coupon lenders are basing reprice decisions on...if the FNCL 4.5 drops back down to 102-25 reprices for the worse will be more likely.

The August FNCL 4.5 is +0-01 at 102-28. BEWARE OF LENDERS WITH AN ITCHY TRIGGER FINGER. Secondary will be much quicker to reprice for the worse than for the better. READ MORE

This is the strategy discussed last night...

The statement I expect the Fed to share: There will be "ups and downs" but the world will move on because central bankers and government's around the world are working together to contain the crisis.

The strategy: look for stocks to open lower tomorrow morning and rally in the afternoon. If this happens and lenders pass along withheld pricing tomorrow morning, LOCK YOUR FLOATING LOANS or go for a floatdown.

So far so good if you're following the above guidance. The next move would be to get your file registered so all you have to do is hit the "SUBMIT LOCK" button if stocks rally at 2:15.