Bond Market Update

Auction Reaction

• The long bond has returned to its opening high, having spent the past three hours in a steady rise off their lows. The 10-yr note has also recovered its loss while shorter tenors have only reversed a portion of the slide that followed the strong Q3 GDP report (4.3%; Briefing.com consensus 3.0%). Treasuries have held their ground in immediate reaction to today's $70 bln 5-yr note sale, which met slightly underwhelming demand. The auction drew a high yield of 3.747%, which tailed the when-issued yield by a tenth of a basis point while the bid-to-cover ratio (2.35x vs 2.38x average) and indirect takedown (59.5% vs 66.2% average) were below average. The U.S. Treasury will complete this week's note auction slate with a $44 bln 7-yr note auction tomorrow at 11:30 ET.
• Yield Check:
  • 2-yr: +2 bps to 3.53%
  • 3-yr: +2 bps to 3.58%
  • 5-yr: +2 bps to 3.74%
  • 10-yr: UNCH at 4.17%
  • 30-yr: UNCH at 4.83%