Bond Market Update

Auction Reaction

• U.S. Treasuries hover just above lows that were set about an hour ago. The long bond is a bit behind while shorter tenors outperform slightly, but the entire complex trades deep in the red with yields at fresh highs for the month and the 2-yr yield threatening its highest settlement since late September. The market has stayed above midday lows in immediate reaction to today's $39 bln 10-yr note reopening, even though the sale met weak demand following yesterday's poor 3-yr note offering. Today's reopening drew a high yield of 4.217%, which tailed the when-issued yield by 0.7 bps while the bid-to-cover ratio (2.45x) was below average (2.53x average). Indirect takedown (74.5%) exceeded the prior 12-auction average (70.7%), making for a silver lining.
• Yield Check:
  • 2-yr: +7 bps to 3.64%
  • 3-yr: +7 bps to 3.66%
  • 5-yr: +7 bps to 3.79%
  • 10-yr: +7 bps to 4.21%
  • 30-yr: +9 bps to 4.86%