The curve steepened again yesterday to +256 as short term yields fell for the fourth trading day in a row. That’s fourteen out of the last sixteen for those keeping track. Bonds shrugged off a better than expected ISM number and a stronger stock market and rallied anyway. Even more impressive is they are rallying ahead of a week of relatively heavy supply. Like I said in yesterday’s recap, the $73 billion in supply this week is far from the $100+ billion weeks we have gotten used to lately, but with bonds being auctioned on 4 days this week for the first time since the Treasury began regularly issuing bonds, it’s a hurdle nonetheless. Treasuries look a little overbought, especially on the short end in my opinion.
Yesterday’s TIPS auction kicked off this week’s supply schedule and went off without a hitch. The bid/cover ratio, a measure of demand for Treasuries, was a healthy 2.51, higher than the 2.37 average for the previous four auctions. Today we will get $35 billion in new three-year notes, an area of the curve that has had a very strong past couple weeks. I wouldn’t be surprised to see a pullback in prices, (higher yields), come with the supply today.
Cliff J. Reynolds Jr.
Yesterday’s TIPS auction kicked off this week’s supply schedule and went off without a hitch. The bid/cover ratio, a measure of demand for Treasuries, was a healthy 2.51, higher than the 2.37 average for the previous four auctions. Today we will get $35 billion in new three-year notes, an area of the curve that has had a very strong past couple weeks. I wouldn’t be surprised to see a pullback in prices, (higher yields), come with the supply today.
Cliff J. Reynolds Jr.
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