Bond Market Update

Auction Reaction

• U.S. Treasuries trade on their lows, making for a continuation of their sideways drift that has pushed the 30-yr yield to within three basis points of its December high while yields on shorter tenors remain notably lower relative to this month's highs. The 2-yr yield, for instance, is still 12 basis points below its peak that was reached on December 10. That said, the 2-yr yield has risen to a fresh high after the U.S. Treasury sold $69 bln in 2-yr notes to soft demand. The auction drew a high yield of 3.499%, which tailed the when-issued yield by 0.3 basis points while the bid-to-cover ratio (2.54x vs 2.61x average) and indirect takedown (53.2% vs 64.2% average) were below average. The U.S. Treasury will sell $70 bln in 5-yr notes tomorrow.
• Yield Check:
  • 2-yr: +2 bps to 3.51%
  • 3-yr: +3 bps to 3.56%
  • 5-yr: +3 bps to 3.72%
  • 10-yr: +2 bps to 4.17%
  • 30-yr: +2 bps to 4.84%