Bond Market Update

Auction Reaction

• Recent action saw the 5-yr note and shorter tenors dip to fresh lows while longer tenors are staying above their worst levels of the day with the long bond showing some relative strength as it fights to remain above its opening level. Up front, the recent pressure followed the completion of today's ok, but not great $70 bln 5-yr note sale. The auction drew a high yield of 3.710%, which tailed the when-issued yield by a tenth of a basis point, while the bid-to-cover ratio (2.34x vs 2.38x average) and indirect takedown (59.4% vs 68.1% average) were below average. The U.S. Treasury will sell $44 bln in 7-yr notes tomorrow.
• Yield Check:
  • 2-yr: +1 bp to 3.60%
  • 3-yr: +2 bps to 3.59%
  • 5-yr: +3 bps to 3.70%
  • 10-yr: +2 bps to 4.14%
  • 30-yr: +1 bp to 4.75%