Bond Market Update

Auction Reaction

• U.S. Treasuries trade on session highs after rallying off their morning lows in reaction to reports that Israel will start negotiations with Lebanon, boosting the chance of the U.S.-Iran ceasefire staying in place. The late morning rally has sent yields on 10s and shorter tenors to within a couple basis points of their opening levels from Wednesday. The 30-yr yield was a step behind, but it is now also just two basis points above yesterday's starting mark even though the just completed $22 bln 30-yr bond reopening met demand that was a bit light. The sale drew a high yield of 4.876%, which tailed the when-issued yield by half of a basis point. However, the bid-to-cover ratio (2.39x vs 2.40x average) and indirect takedown (64.1% vs 64.0% average) were essentially in line with the prior 12-auction average.
• Yield Check:
  • 2-yr: -4 bps to 3.75%
  • 3-yr: -4 bps to 3.77%
  • 5-yr: -4 bps to 3.89%
  • 10-yr: -3 bps to 4.26%
  • 30-yr: -2 bps to 4.87%