Bond Market Update

Auction Reaction

• U.S. Treasuries continue hovering near their opening levels after a failed bounce attempt. The market followed its lower start with a rebound attempt, but resistance was found about an hour after the cash start. Treasuries are holding just above their lows going into the early afternoon, having shown very little reaction to today's $70 bln 5-yr note sale. Just like yesterday's 2-yr note offering, today's auction priced right on the screws, drawing a high yield of 3.519%. The bid-to-cover ratio (2.38x vs 2.40x average) was a touch below average while indirect takedown (70.3% vs 66.7% average) exceeded the prior 12-auction average.
• Yield Check:
  • 2-yr: UNCH at 3.55%
  • 3-yr: +3 bps to 3.48%
  • 5-yr: +3 bps to 3.51%
  • 10-yr: +4 bps to 3.78%
  • 30-yr: +4 bps to 4.13%