Bond Market Update

Auction Reaction

• U.S. Treasuries of most tenors continue hovering near their opening levels after facing some early volatility while the long bond underperforms, holding a modest loss. Treasuries retreated from highs over the past couple hours, facing some additional impulse selling in reaction to the just completed $70 bln 5-yr note offering, which met weaker demand than yesterday's 2-yr note sale. Today's 5-yr auction drew a high yield of 4.121%, which tailed the when-issued yield by 1.1 bps. The bid-to-cover ratio (2.40x vs 2.43x average) was a touch below average while indirect takedown (67.2% vs 66.3%) was better than average.
• Yield Check:
  • 2-yr: -8 bps to 4.40%
  • 3-yr: -3 bps to 4.23%
  • 5-yr: -2 bps to 4.13%
  • 10-yr: UNCH at 4.24%
  • 30-yr: +2 bps to 4.49%