Bond Market Update

Auction Reaction

• U.S. Treasuries trade just above their lowest levels of the year after today's opening retreat, which took place alongside an acceleration in crude oil's rally past $100/bbl, and received added pressure from a PPI report for August that showed little relief on the inflationary front ahead of tomorrow's release of August CPI (Briefing.com consensus 0.4%; prior 0.1%) and Core CPI (Briefing.com consensus 0.2%; prior 0.2%). The past few minutes have some impulse buying after the U.S. Treasury completed this week's note and bond auction slate with a stellar $22 bln 30-yr bond reopening. The sale drew a high yield of 5.308%, which stopped through the when-issued yield by a stunning 2.7 basis points while the bid-to-cover ratio (2.61x vs 2.41x average) and indirect takedown (79.5% vs 66.5% average) were well above average. This makes for a great finish to this week's strong auction slate, though it would be hard to surmise that from the overall action, which has yields pinned to their highest levels of the year.
• Yield Check:
  • 2-yr: +12 bps to 4.55%
  • 3-yr: +11 bps to 4.63%
  • 5-yr: +11 bps to 4.72%
  • 10-yr: +8 bps to 4.92%
  • 30-yr: +4 bps to 5.33%