We finally got a good Treasury auction as buyers took advantage of the sharp selloff over the past 3 days. The 7 yr auction yielded 2.13%, about 1 bp below the when issued. The bid to cover of 2.70 was above the one year average of 2.53. Also of note, direct and indirect bidders took 90% of the deal vs the previous 12 month average of 79%.
Bottom line, I’m going to chalk up this solid auction to the recent cheapening which made it that much more attractive. The 7 yr yield sits at a 2 month high. In response, the 10 yr yield is back to unchanged on the day at 2.31% after touching 2.34% this morning. The short end has also bounced too with the yield down at 1.45-.46%. With respect to rate hike odds in December, they stand at 66%. On hopes for tax reform and the potential growth boost, the 2s/10s spread is at a one month high but at 85 bps it still stands well below the post election peak of 136 bps back in December. Any messaging there? I believe so.
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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.