Bond Market Update

Auction Reaction

• Recent action saw the 5-yr note and shorter tenors return to their early lows while 10s and 30s remain ahead, trading not far below their best levels of the day. Intraday action has unfolded in relatively quiet fashion while equities have rallied strongly. The underperformance in the 2-yr note continued during today's $69 bln 2-yr note sale, which met weak demand. The auction drew a high yield of 3.795%, which tailed the when-issued yield by 0.6 basis points while the bid-to-cover ratio (2.52x vs 2.65x average) and indirect takedown (56.2% vs 70.1% average) were well below average. Tomorrow, the U.S. Treasury will sell $70 bln in 5-yr notes.
• Yield Check:
  • 2-yr: +7 bps to 3.82%
  • 3-yr: +6 bps to 3.83%
  • 5-yr: +3 bps to 3.99%
  • 10-yr: -1 bp to 4.40%
  • 30-yr: -3 bps to 4.88%