Bond Market Update

Auction Reaction

• U.S. Treasuries of most tenors are back near their opening levels after a bounce off lows that were reached about an hour after the market tagged morning highs. The 2-yr note underperforms, remaining near its low amid falling December rate cut odds, while longer tenors are much closer to their highs, having shown a muted reaction to today's soft $16 bln 20-yr bond sale. The offering drew a high yield of 4.706%, which tailed the when-issued yield by 0.2 basis points. The bid-to-cover ratio (2.41x) was a bit below average (2.61x) and so was indirect takedown (59.5% vs 66.3% average). While there has been some volatility today, it has taken place inside a narrow range, keeping the 10-yr yield between 4.10% and 4.13%.
• Yield Check:
  • 2-yr: UNCH at 3.58%
  • 3-yr: -1 bp to 3.57%
  • 5-yr: -1 bp to 3.69%
  • 10-yr: -1 bp to 4.12%
  • 30-yr: -1 bp to 4.74%