Bond Market Update

Auction Reaction

• Recent action saw the entire Treasury complex advance to fresh highs with longer tenors maintaining their daylong show of relative strength. The uptick to new highs took place even though today's $44 bln 7-yr note auction met weak demand. The sale drew a high yield of 3.925%, which tailed the when-issued yield by 0.3 basis points. The bid-to-cover ratio (2.49x) was below average (2.62x) while indirect takedown (77.4%) exceeded the prior 12-auction average (69.5%) by a healthy margin, making for a welcome break from the recent trend of soft foreign demand. With today's gains in Treasuries, the 10-yr yield is now just two basis points above its lowest level of the month.
• Yield Check:
  • 2-yr: +1 bp to 3.63%
  • 3-yr: UNCH at 3.59%
  • 5-yr: -1 bp to 3.69%
  • 10-yr: -3 bps to 4.21%
  • 30-yr: -4 bps to 4.87%