Bond Market Update

5-Yr Auction Reaction

• U.S. Treasuries have dipped from their midday highs, returning most tenors to their starting levels. The retreat from the day's best levels picked up a bit after today's second auction—a $70 bln 5-yr note sale—met much weaker demand than the earlier 2-yr note offering. The just completed 5-yr sale drew a high yield of 4.408%, tailing the when-issued yield by nearly a basis point while the bid-to-cover ratio (2.28x vs 2.38x average) and indirect takedown (59.2% vs 63.6% average) were below average. The U.S. Treasury will complete this week's quick auction slate with a $44 bln 7-yr note sale tomorrow.
• Yield Check:
  • 2-yr: -1 bp to 4.32%
  • 3-yr: -1 bp to 4.35%
  • 5-yr: -2 bps to 4.40%
  • 10-yr: -3 bps to 4.65%
  • 30-yr: -3 bps to 5.13%