Bond Market Update

Auction Reaction

• U.S. Treasuries have backpedaled from their morning highs, dipping back below their starting levels, though the entire complex remains firmly in the green at this time. That could change as the day goes on since the advance just received a headwind from a mediocre $58 bln 3-yr note auction that will be followed by a $42 bln 10-yr note sale tomorrow and a $25 bln 30-yr bond offering on Wednesday. The just completed 3-yr auction drew a high yield of 4.152%, which tailed the when-issued yield by nearly a basis point. However, the bid-to-cover ratio (2.60x vs 2.57x average) and indirect takedown (70.6% vs 64.3% average) were above average.
• Yield Check:
  • 2-yr: -2 bps to 4.18%
  • 3-yr: -2 bps to 4.16%
  • 5-yr: -3 bps to 4.18%
  • 10-yr: -4 bps to 4.32%
  • 30-yr: -5 bps to 4.51%