Bond Market Update

Auction Reaction

• U.S. Treasuries continue hovering near their starting levels with shorter tenors sitting just below their starting marks while the long bond is just above its opening level. Treasuries attempted to bounce from their lower start, but they have not been able to put together a sustained bounce even though oil has backed down from its overnight high. On a side note, the New York Fed released its latest Survey of Consumer Expectations for August, showing a dip in three-year inflation expectations to 3.2% from 3.3% while the one- and five-year outlooks remained at their respective 3.6% and 3.0%. Treasuries are holding just above their lows in immediate reaction to the just completed $58 bln 3-yr note sale, which met good demand. The sale drew a high yield of 4.474%, which stopped through the when-issued yield by a tenth of a basis point while the bid-to-cover ratio (2.72x) was above the prior 12-auction average (2.62x). Indirect takedown (62.1%); however, was a touch below average (64.1%).
• Yield Check:
  • 2-yr: +1 bp to 4.39%
  • 3-yr: +1 bp to 4.46%
  • 5-yr: +1 bp to 4.56%
  • 10-yr: +1 bp to 4.79%
  • 30-yr: UNCH at 5.25%