Bond Market Update

Auction Reaction

• U.S. Treasuries trade at their worst levels of the day after today's $69 bln 2-yr note sale met weak demand, resulting in a recent slip past morning lows. Treasuries climbed off their worst levels in mid-morning trade, but all that progress has been reversed over the past few minutes as the market responded to the disappointing 2-yr note offering. The sale drew a high yield of 3.936%, which tailed the when-issued yield by 1.8 basis points while the bid-to-cover ratio (2.44x) was below average (2.61x). Meanwhile, indirect takedown (59.4%) was a touch above average (59.3%). The U.S. Treasury will sell $70 bln in 5-yr notes tomorrow.
• Yield Check:
  • 2-yr: +13 bps to 3.95%
  • 3-yr: +12 bps to 3.96%
  • 5-yr: +11 bps to 4.06%
  • 10-yr: +9 bps to 4.42%
  • 30-yr: +6 bps to 4.97%