Bond Market Update

Auction Reaction

• U.S. Treasuries have inched up off their morning levels, though the 10-yr note and shorter tenors are still slightly lower for the day while the long bond has maintained its early resilience, turning positive. The 30-yr bond has outperformed from the start while shorter tenors followed its lead in recent trade. However, shorter tenors have dipped from their rebound highs in immediate reaction to today's $70 bln 5-yr note sale, which met weaker demand than yesterday's mediocre 2-yr note offering. Today's sale drew a high yield of 3.615%, which tailed the when-issued yield by 0.7 bps, while the bid-to-cover ratio (2.32x vs 2.42x average) and indirect takedown (62.5% vs 65.7% average) were below average. The U.S. Treasury will cap this week's note auction slate with a $44 bln 7-yr note offering tomorrow.
• Yield Check:
  • 2-yr: +1 bp to 3.47%
  • 3-yr: +2 bps to 3.48%
  • 5-yr: +2 bps to 3.62%
  • 10-yr: +1 bp to 4.04%
  • 30-yr: -1 bp to 4.68%