Bond Market Update

Auction Reaction

• U.S. Treasuries trade on their lows after a steady retreat from their morning highs. The 10-yr note and the long bond remain in positive territory because they opened with big gains, but those gains have been trimmed considerably with the 10-yr yield up ten basis points off this morning's low. The market saw some impulse buying off lows across the complex after the U.S. Treasury followed yesterday's weak 2-yr note sale with a much better 5-yr note offering. Today's $70 bln sale stopped through by a basis point and the bid-to-cover ratio (2.41x) was above the prior 12-auction average (2.38x). Indirect takedown (64.0%) was a bit below average (69.1%) but much better than yesterday.
• Yield Check:
  • 2-yr: +3 bps to 3.84%
  • 3-yr: +4 bps to 3.85%
  • 5-yr: +1 bp to 3.99%
  • 10-yr: -3 bps to 4.36%
  • 30-yr: -7 bps to 4.81%