Bond Market Update

Auction Reaction

• U.S. Treasuries have dipped from their rebound highs that were reached around noon, facing some renewed pressure after the just completed $58 bln 3-yr note sale. The rebound that preceded the auction found resistance shortly after the 10-yr note briefly turned positive. Shorter tenors remain a bit ahead 10s and 30s, but they have faced some pressure after the 3-yr note sale met weak demand, drawing a high yield of 3.878%, which tailed the when-issued yield by nearly a basis point. The bid-to-cover ratio (2.45x vs 2.58x average) was below the prior 12-auction average, as was indirect takedown (56.9% vs 64.2% average).
• Yield Check:
  • 2-yr: -3 bps to 3.97%
  • 3-yr: -2 bps to 3.88%
  • 5-yr: -1 bp to 3.86%
  • 10-yr: +1 bp to 4.03%
  • 30-yr: +2 bps to 4.32%