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June 27, 2017 By Peter Boockvar

5 yr auction not so good / Yellen speaking, zzzzzzz


After a solid 2 yr note auction yesterday, the 5 yr auction today was soft. The yield of 1.828% was above the when issued of near 1.82%. The bid to cover of 2.33 was below the 12 month average of 2.43. The one positive was that dealers got left with 26% of the auction vs the one year average of 32%, leaving the balance with direct and indirect bidders.

Bottom line, today’s auction comes in the middle of a messy day in bonds, as stated earlier. The 6 bps rise in the 5 yr yield is the biggest one day move in 2 ½ months. I’ll say what I said this morning, the bull case on bonds is easy: lower inflation and modest growth and the Fed hiking short rates. The bear case is harder to imagine or quantify and that is the end of the European bond market bubble because of a reversal of ECB policy and the implications that has for yields everywhere as we are all in the same bond and market driven interest rate bed together.

I still believe the yields touched in July 2016 after Brexit will not be seen again in our lifetimes.

….

Yellen is speaking now in a Q&A, not a prepared speech and I think I’m about to fall asleep. It is a quantitative discussion on their models and economic theory. As of yet, she is saying nothing about current trends and interest rate/balance sheet intentions.

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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