After the ordinary 3 yr note auction, the 10 yr auction was better. The yield of 2.346% was just about spot on with the when issued. The bid to cover of 2.54 was above the 12 month average of 2.42 and the percentage of direct and indirect bidders that took down the auction totaled 75%, above the one year of 69% and thus leaving dealers with the balance.
Bottom line, yields are little changed in response (vs where they were before the results but still down slightly on the day) as we await the minutes from the FOMC meeting at 2pm which I think will tell us nothing new. I think the real news the US Treasury market should be getting ready for is in two weeks when the ECB lays out its 2018 QE end game plan. This because of our close correlation between our market and in Europe. By announcing that NIRP won’t end until 2019 will be the ECB’s goal in keeping things calm while they end purchases. We’ll see it that’s like watching paint dry too. As for inflation expectations embedded in Treasuries, the 10 yr inflation breakeven is unchanged at the day but sits at 1.89%, the highest in 5 months.
Lastly, the 2s/10s spread is narrower by 2 bps today at a 2 week low at just under 83 bps. I do have to point out again this level vs where it was in December right after the excitement with the Trump victory. It was 136 bps. Any spread below 75 bps would be a 10 year low.