Market Analytics and Considerations
Key Notes
On Monday, 10-year Treasury note rates spiked to their top levels of the session as a result of the poorest demand for 10-year notes until December 2009, which was seen in an auction of $32 billion in 10-year notes. The freshly sold notes have a “tail” of 3.7 basis points as contrasted to the yield at the time of issuance.
Thomas Simons’ analysis indicates that this is the 10-year note auction’s greatest tail since December 2009. After that, 10-year rates were trading at 3.516%, up and over 5 basis points on the day. Due to the fact that treasury yields move oppositely to yields, the recently auction notes were offered at a lower price than comparable notes already trading in the debt securities.
The auction for the 10-year note was awful. The relaunch auction’s bid-to-cover ratio at 2.31, which was lower than the one-year norm of 2.44 as well as the second-weakest offer for any 10-year note auction until September 2020. The yield of 3.625% was roughly 4 basis points higher than where it was pricing in just before. In addition, dealers received the remainder notes after indirect and direct bidders took half of the notes offered at the auction.
In conclusion, demand in this market was somewhat weak and in the face of a severe curve inversion following a decent reduction of roughly 75 bps in the 10-year yield over the preceding few months.
