Market Structure Notes — Helmholtz Watson TL;DR The Setup The U.S. 2s/10s curve has already begun to steepen, with long-end yields holding near recent highs even as policy expectations remain stable. Across this series, a consistent pattern has emerged: If all of that is true, then one implication follows: The yield curve should steepen. The Break For years, the curve behaved as a policy instrument. That relationship is breaking. The curve is no longer primarily driven by policy—it is driven … Continue reading “Why Yield Curves Are Likely to Steepen”
Why Treasury Supply Is Driving Yields Higher — Not the Fed
Market Structure Notes — Helmholtz Watson TL;DR The Setup The U.S. 10-year yield is holding near ~4.4–4.5%, close to the top of its 2026 range, even as policy expectations remain stable. If term premium is rising, the next question is straightforward: What’s pushing it higher? The answer is increasingly clear: Supply. While markets remain focused on the next move from the Federal Reserve, something more structural is happening in the background: Treasury issuance is accelerating. Deficits remain elevated. Funding needs … Continue reading “Why Treasury Supply Is Driving Yields Higher — Not the Fed”
Abundant Marketplace Liquidity and Easy Credit Availability – Bond Market Review
Friday saw a repeat for U.S. Treasuries closing out the week on a sharply lower note, yields on the 10-yr note and shorter tenors went their highest closing levels since mid-December while the long bond outperformed, keeping its yield three basis points below its highest close from last month. We saw the same last Friday with yields coming off their lowest levels of the year after the red-hot January jobs report showed headline growth of 353,000, twice as high consensus. … Continue reading “Abundant Marketplace Liquidity and Easy Credit Availability – Bond Market Review”
Impressive 30-year Treasury Bond Sale Completes Strong Week of Auctions
The U.S. Treasury completed this week’s note and bond auction offerings today with another strong auction. U.S. Treasuries rallied off afternoon lows back to their starting levels after the U.S. Treasury’s $25 billion 30-yr bond sale. The auction drew a high yield of 4.360%, which stopped through the when-issued yield by two basis points. The bid-to-cover ratio (2.40x) was comfortably above average (2.38x), as was indirect takedown (70.7% vs 67.8% average). The S&P 500 continues to hover near record highs … Continue reading “Impressive 30-year Treasury Bond Sale Completes Strong Week of Auctions”
10-year Bond Auction Sees Strong International Takedown
U.S. Treasuries came off afternoon lows in reaction to strong demand at the $42 billion 10-yr Treasury note auction. The sale followed yesterday’s strong 3-yr note offering. The sale drew a high yield of 4.093%, which stopped through the when-issued yield by 1.2 bps while the bid-to-cover ratio (2.56x vs 2.49x average) and indirect takedown (71.0% vs 66.7%) were comfortably above their respective prior 12-auction averages. However, the 5-yr note and longer tenors continue with small losses while shorter tenors … Continue reading “10-year Bond Auction Sees Strong International Takedown”
Bonds Bounce After Sharp Losses Following Strong 3-year Treasury Note Auction
U.S. Treasuries traded to fresh highs after the completion of today’s $54 bln 3-yr note sale, which met strong demand. U.S. bonds climbed on Tuesday, bouncing from two days of sharp losses. No U.S. economic data on today’s calendar helped also. The sale drew a high yield of 4.169%, which stopped through the when-issued yield by a solid 0.8 bps while the bid-to-cover ratio (2.58x vs 2.68x) was below average. Indirect takedown (66.0% vs 63.1%) was solid. Issues in the … Continue reading “Bonds Bounce After Sharp Losses Following Strong 3-year Treasury Note Auction”
Rates React to Fed and Strong Jobs – Bond Market Review
U.S. Treasuries closed out the week on a sharply lower note, yields coming their lowest levels of the year after the red-hot January jobs report showed headline growth of 353,000, twice as high consensus. The report fed the rationale that the Fed will maintain its hawkish rhetoric. Notably Chicago Fed President Goolsbee said that the report will not influence policy in the near term, noting that the drop in the average workweek to 34.1 hours from 34.3 hours reflected weakness … Continue reading “Rates React to Fed and Strong Jobs – Bond Market Review”
Bond Traders Weekly Outlook: Treasury Refunding, FOMC Headwinds
U.S. Treasuries closed out the week lower in response to stronger than expected personal spending (actual 0.7%; consensus 0.4%) in December and Pending Home Sales for December (actual 8.3%; consensus 2.3%) giving rise to Fed officials hawkish rhetoric ahead. The selling drove the 10-yr yield back above its 50-day moving average (4.129%) while yields on 2s and 5s reversed the bulk of their declines from Thursday. This week’s action alleviated some of the pressure on the 2s10s spread, expanding it … Continue reading “Bond Traders Weekly Outlook: Treasury Refunding, FOMC Headwinds”
Stifled Demand at 7-year Treasury Bond Auction with International Buyers Returning
U.S. Treasuries completed this week’s note auctions with a $41bln 7-yr notes that met stifled demand, post-auction bonds climbed off their afternoon lows. The sale drew a high yield of 4.109%, which tailed the when-issued yield by 0.3 bps. That is 4.109% (When-Issued: 4.106%). However, the bid-to-cover ratio (2.57x vs 2.54x average) and indirect takedown (69.1% vs 68.9%) was up from 63.7% last month. In deference to yesterday’s poor 5-year auction. Equities bounced off their afternoon lows alongside the Treasury market’s … Continue reading “Stifled Demand at 7-year Treasury Bond Auction with International Buyers Returning”
Anemic 5-Year Note Treasury Auction, Tails Two Basis Points
U.S. Treasuries slid to fresh lows in response to the $61billion 5-yr note sale meeting poor demand. The auction drew a high yield of 4.055%, which tailed the when-issued yield by two basis points which was the largest tail since Sept 2022. The bid-to-cover ratio (2.31x vs 2.52x average) and indirect takedown (60.9% vs 68.8% average) were below the average seen at the past 12 auctions. The post-auction slide lifted the 5-yr yield to a fresh high for the week … Continue reading “Anemic 5-Year Note Treasury Auction, Tails Two Basis Points”