Bond Market Update

Auction Reaction

• U.S. Treasuries hover just below their opening levels after rising off their mid-morning lows alongside some recent relief in the price of oil. Today's early selling briefly lifted yields on the 10-yr note and shorter tenors past their highs from late March, but they have dipped back below those levels. The market could be in for some selling during the last couple hours of trade after the U.S. Treasury completed this week's trifecta of disappointing auctions with a weak sale of $25 bln in 30-yr bonds. The auction drew a high yield of 5.046%, which tailed the when-issued yield by half of a basis point while the bid-to-cover ratio (2.30x) was below average (2.39x). Indirect takedown (66.6%) exceeded the prior 12-auction average (64.2%) making for a silver lining.
• Yield Check:
  • 2-yr: -1 bp to 3.99%
  • 3-yr: UNCH at 4.03%
  • 5-yr: UNCH at 4.13%
  • 10-yr: +1 bp to 4.48%
  • 30-yr: +1 bp to 5.04%