Bond Market Update

Auction Reaction

• U.S. Treasuries trade near their best levels after staging a comeback from their starting lows. The rebound has been paced by longer tenors, with 10s and 30s now trading modestly higher for the day while the front end remains a bit behind. The market started rebounding shortly after the cash open, followed by an extension to fresh highs during the past hour, after President Trump said that there are no plans for additional attacks on Iran ahead of the midterms, countering recent press speculation. Treasuries of most tenors have extended the rebound in the past few minutes after the U.S. Treasury completed this week's note and bond auction slate with a good $22 bln 30-yr bond reopening. Granted, the sale produced a slight tail of one-tenth of a basis point, but the bid-to-cover ratio (2.54x vs 2.42x average) and indirect takedown (72.3% vs 68.0% average) were comfortably above average, serving as reassurance about demand for long-term debt.
• Yield Check:
  • 2-yr: -2 bps to 4.75%
  • 3-yr: -3 bps to 4.88%
  • 5-yr: -3 bps to 4.99%
  • 10-yr: -4 bps to 5.24%
  • 30-yr: -4 bps to 5.62%