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May 10, 2017 By Peter Boockvar

10 yr Auction Was Worse Than the Soft 3 yr

After a weak 3 yr note auction, the 10 yr was worse. The yield of 2.40% was almost 2 bps above the when issued. The bid to cover of 2.33 was below the 12 month average of 2.47 and dealers got stuck with 34% of the auction, above the one year average of 28%. Treasuries immediately sold off in response and the now off the run is yielding 2.41% vs 2.37% earlier today and up 1 bp vs yesterday’s close. As the 2 yr yield is up 1 bp too, the spread between the two is unchanged.

Bottom line, until proven otherwise, the 2.30-2.60% range remains the predominant trend. The trade below lasted about two weeks and was quickly reversed when French politics resolved itself. It certainly wasn’t because there was much of a change in the US economic data but there was improvement in Europe. European bonds and the influence of the ECB may very well ultimately determine the direction of US yields this year because of the high correlation as the ECB most likely continues its tapering. Right now the spread between the US 10 yr yield and German bund 10 yr yield is at 198 bps. As for the US economic influence on Treasuries, the growth is good enough for the Fed to continue hiking but the flattening of the curve is a response that participants are a bit worried about the impact coming off a punk Q1. The 2s/10s spread stands just 5 bps from where it stood on election day.

10 year Yield, 1 month:

Screen Shot 2017-05-10 at 11.40.56 AM

10 year Yield, 5 years:

Screen Shot 2017-05-10 at 11.40.13 AM

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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