Bond Market Update

Auction Reaction

• U.S. Treasuries sit on their lows with the 2-yr yield inching to a fresh high for the week while yields on 10s and 30s remain below yesterday's highs thanks to a continued show of relative strength from longer tenors. Today's intraday selling has taken place alongside a rise in the price of oil, which is now creeping toward $94/bbl. Equities, however, have been able to maintain their gains despite the headwind from crude oil. Back to Treasuries, the outperformance in longer tenors received some additional fuel from a strong $13 bln 20-yr bond reopening. The sale drew a high yield of 4.883%, which stopped through the when-issued yield by nearly a basis point while the bid-to-cover ratio (2.68x vs 2.64x average) and indirect takedown (67.4% vs 64.7% average) were above average.
• Yield Check:
  • 2-yr: +2 bps to 3.80%
  • 3-yr: +2 bps to 3.82%
  • 5-yr: +1 bp to 3.92%
  • 10-yr: UNCH at 4.30%
  • 30-yr: UNCH at 4.90%