Bond Market Update

Auction Reaction

• Recent action saw an uptick to fresh intraday highs after a slow rise off lows that were recorded during the first hour of today's session. Longer tenors underperformed in the early going, and they continue trading behind, but the entire complex has spent the past four hours in a steady rise that has lifted 3s and 2s into positive territory. The bounce has received some additional assistance from the just completed $69 bln 2-yr note sale, which met stellar demand. The auction drew a high yield of 3.874%, which stopped through the when-issued yield by 0.6 basis points while the bid-to-cover ratio (2.68x vs 2.65x average) and indirect takedown (69.0% vs 64.5% average) were above average. The U.S. Treasury will sell $70 bln in 5-yr notes tomorrow.
• Yield Check:
  • 2-yr: -2 bps to 3.91%
  • 3-yr: -1 bp to 3.73%
  • 5-yr: +1 bp to 3.67%
  • 10-yr: +2 bps to 3.84%
  • 30-yr: +3 bps to 4.14%