Bond Market Update

Auction Reaction

• U.S. Treasuries have climbed back above their starting levels, but they remain in the red with shorter tenors leading the retreat as WTI crude revisits $100/bbl. Today's selling has lifted yields to three-week highs, and the market could see some additional pressure after the just-completed $44 bln 7-yr note sale met weak demand, capping this week's unimpressive note auction slate. Today's sale drew a high yield of 4.175%, which tailed the when-issued yield by half of a basis point while the bid-to-cover ratio (2.51x vs 2.53x average) and indirect takedown (58.4% vs 64.2% average) were below average.
• Yield Check:
  • 2-yr: +4 bps to 3.84%
  • 3-yr: +3 bps to 3.87%
  • 5-yr: +4 bps to 3.99%
  • 10-yr: +3 bps to 4.36%
  • 30-yr: +1 bp to 4.95%