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August 9, 2017 By Peter Boockvar

10 yr auction terrible


United States

In contrast to the solid 3 yr note auction yesterday (thus fading expectations of many more Fed rate hikes), the 10 yr auction today was terrible. The yield of 2.25% was well above the when issued of 2.235%. The bid to cover of 2.23 was well below the 12 month average of 2.44 and the smallest since November. Also of note, dealers got stuck with 35% of the auction, the most since December and that is more than the one year average of 29%.

Bottom line, the results of the two auctions this week are night and day. I’ll garner a guess that yields near 2.20% were just no longer that attractive sitting at 6 week low at the same time 10 yr inflation breakevens are at a 9 week high coincident with the recent uptick in commodity prices with the CRB up 9% over the past 7 weeks. The now off the run 10 yr yield is up by 1 bp since the auction results were posted but are still down 2 bps on the day.

I still argue the tug of war in longer term treasuries remains between the pull lower in yields because of worries about Fed tightening in a modest growth economy (less than 2%) with the auto sector in a recession on one hand and the pull higher due to QT and likely more ECB tapering coming soon. Thus, calling where yields are going from here is not like the old days of just trying to predict growth and inflation right.

Filed Under: Latest Data

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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