Bond Market Update

Auction Reaction

• Recent action saw the 10-yr note and shorter tenors slip past their morning lows while the long bond remains a touch above its worst level of the day. Overall, intraday action has been confined to the downside after the complex retreated from opening highs in response to today's batch of economic data. Treasuries have held at their lows in immediate reaction to the just completed $70 bln 5-yr note offering, which drew weaker demand than yesterday's 2-yr note sale, though it was not bad. Today's auction drew a high yield of 4.393%, tailing the when-issued yield by 0.2 bps, while the bid-to-cover ratio (2.37x vs 2.38x average) and indirect takedown (61.5% vs 63.7% average) were a touch below average. This week's note auction slate will be capped off with a $44 bln 7-yr note offering tomorrow.
• Yield Check:
  • 2-yr: +3 bps to 4.23%
  • 3-yr: +3 bps to 4.29%
  • 5-yr: +4 bps to 4.39%
  • 10-yr: +3 bps to 4.67%
  • 30-yr: +1 bp to 5.19%