U.S. Treasuries finished mixed, with the yield curve flattening notably.
As of 3 p.m. New York time, futures volume was about 65% of the 20-day average.
With no strong fundamental catalysts, price action may be driven by investors adjusting positions for this week's coupon auctions and the Federal Reserve's rate decision on Oct. 28.
The Treasury options market has recently seen persistent demand for bullish structures on 10-year notes.
Shortly after 3 p.m. New York time, long-end yields were down about 2 basis points on the day, while the front-end 2-year yield rose more than 3 basis points.
The 2s10s and 5s30s spreads narrowed by 3 to 4 basis points, near their intraday lows.
The coupon auction cycle began a day earlier than usual.
The $69 billion 2-year note auction produced slightly soft results, with the high yield above the when-issued level, but the direct bidder allotment rose to 41.3%, the highest since data began in 2004, while the primary dealer allotment was 12%, slightly below the previous auction, and the indirect bidder allotment fell to 45.7%, the lowest in nearly five years.
Price moves after the auction were limited, and the pattern of a flatter curve and underperformance in short-dated debt largely held.
In Treasury options, recent demand for upside protection continued, with investors continuing to position through December-expiry 10-year note call structures.
As of 4:08 p.m. New York time, the 2-year Treasury yield was 4.7138%.
The 5-year Treasury yield was 4.8209%.
The 10-year Treasury yield was 4.9842%.
The 30-year Treasury yield was 5.2975%.
The yield gap between 2-year and 10-year notes was 26.83 basis points.
The yield gap between 5-year and 30-year notes was 47.48 basis points.
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