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.