Bond Market Update

Auction Reaction

• U.S. Treasuries trade on their highs after overcoming some early softness, though the long bond has yet to make it back into positive territory. The entire complex is holding near highs even though the just-completed $70 bln 5-yr note auction met weak demand. The sale drew a high yield of 3.724%, which tailed the when-issued yield by 0.7 basis points. The bid-to-cover ratio (2.36x) was below average (2.39x), which was also the case with indirect takedown (60.5% vs 69.0%), reflecting ongoing caution among foreign investors.
• Yield Check:
  • 2-yr: -5 bps to 3.63%
  • 3-yr: -2 bps to 3.60%
  • 5-yr: -3 bps to 3.72%
  • 10-yr: -1 bp to 4.25%
  • 30-yr: +2 bps to 4.93%