Bond Market Update

Auction Reaction

• U.S. Treasuries trade just below their mid-morning highs after a steady recovery from their modestly lower start. The market has displayed resilience for the second day in a row with yields reaching fresh lows for the year as concerns about growth send crude oil toward its 2023 low (63.64). Treasuries are staying near their best levels of the day after the just completed $58 bln 3-yr note sale met strong demand. The auction drew a high yield of 3.440%, which stopped through the when-issued yield by nearly two basis points while the bid-to-cover ratio (2.66x vs 2.59x average) and indirect takedown (78.2% vs 62.5% average) were above average. The sale will be followed by a $39 bln 10-yr note auction tomorrow.
• Yield Check:
  • 2-yr: -6 bps to 3.61%
  • 3-yr: -6 bps to 3.47%
  • 5-yr: -5 bps to 3.44%
  • 10-yr: -4 bps to 3.66%
  • 30-yr: -3 bps to 3.97%