Bond Market Update

Auction Reaction

• U.S. Treasuries continue holding slim gains after establishing today's trading range during the opening 90 minutes of action. The belly trades a step ahead of other tenors as the patiently market awaits tomorrow's release of July CPI (Briefing.com consensus 0.1%; prior -0.4%) and Core CPI (Briefing.com consensus 0.2%; prior 0.0%) at 8:30 ET. Treasuries are holding their ground in reaction to the just completed $58 bln 3-yr note offering, which met good demand. The sale drew a high yield of %, which stopped through the when-issued yield by half of a basis point while the bid-to-cover ratio (2.71x vs 2.64x average) and indirect takedown (64.2% vs 63.3% average) were above average. The U.S. Treasury will follow today's sale with a $42 bln 10-yr note offering tomorrow.
• Yield Check:
  • 2-yr: -2 bps to 4.22%
  • 3-yr: -1 bp to 4.29%
  • 5-yr: -2 bps to 4.39%
  • 10-yr: -2 bps to 4.68%
  • 30-yr: -1 bp to 5.23%