Bond Market Update

Auction Reaction

• U.S. Treasuries hover just below highs that were reached about an hour ago with shorter tenors holding onto their gains while the 10-yr note and the long bond remain in the red. The market is holding steady after the U.S. Treasury sold $69 bln in 2-yr notes to solid demand. The auction was right on the screws with the high yield matching the when-issued yield of 3.520%, while the bid-to-cover ratio (2.59x vs 2.63x average) was a touch below average and indirect takedown (67.6% vs 64.8% average) exceeded the average seen over the past 12 auctions. The U.S. Treasury will follow today's sale with a $70 bln 5-yr note auction tomorrow.
• Yield Check:
  • 2-yr: -5 bps to 3.53%
  • 3-yr: -1 bp to 3.46%
  • 5-yr: UNCH at 3.49%
  • 10-yr: +1 bp to 3.75%
  • 30-yr: +2 bps to 4.10%