Bond Market Update

Auction Reaction

• U.S. Treasuries are back near their starting levels after a solid bounce off their morning lows. Treasuries slid from their opening levels during the first couple hours of action, but they found support once yields on most tenors approached their closing levels from Monday. The past three hours have seen a steady bounce with 10s and 30s revisiting their best levels of the day while shorter tenors remain a bit behind. Treasuries have held near their rebound highs even though the U.S. Treasury completed this week's mixed note auction slate with a poor sale of $44 bln in 7-yr notes. The auction drew a high yield of 3.781%, which tailed the when-issued yield by 0.6 bps while the bid-to-cover ratio (2.46x vs 2.60x average) and indirect takedown (56.7% vs 67.4% average) were below average.
• Yield Check:
  • 2-yr: +3 bps to 3.49%
  • 3-yr: +2 bps to 3.47%
  • 5-yr: +1 bp to 3.58%
  • 10-yr: UNCH at 4.00%
  • 30-yr: -1 bp to 4.65%