U.S. Treasury prices closed off their session lows, with yields on the middle part of the curve still rising by as much as 3 basis points during the day. Early in the U.S. afternoon, concerns over uncertain prospects for a U.S.-Iran ceasefire led to sharp swings in futures prices. Rising oil prices exerted pressure on U.S. government bonds. The reopening of $26 billion in 5-year Treasury Inflation-Protected Securities (TIPS) did not trigger a significant market reaction.
Shortly after 3 p.m. New York time, U.S. Treasury yields were higher across the board by approximately 1.5 to 3 basis points. The 5s30s spread narrowed by about 1 basis point on the day, nearing its session low, with the middle part of the yield curve underperforming. The 10-year Treasury yield finished below its daily high but was still up about 2 basis points for the session.
In the early afternoon, futures experienced volatile trading, oil prices advanced significantly, and equities fell to their session lows. These moves partially reversed approaching the close, with stocks still down about 0.4% and WTI crude futures up approximately 3.5%.
Market volatility was driven by signs of escalating conflict involving Iran, including reports from Iranian media that air defense systems had been activated in parts of Tehran in response to "hostile targets."
The results of the $26 billion 5-year TIPS reopening were solid, with the high yield coming in about 0.2 basis points above the level seen in pre-auction trading. Primary dealers were allotted 8.5%, consistent with recent averages, while indirect bidders and direct bidders received allocations of 64.6% and 26.9%, respectively.
As of 3 p.m. New York time, trading volume in Treasury futures was about 25% higher than the 20-day average. Ultra-long-term Treasury futures were the most active, with volume roughly 40% above usual levels.
As of 4:10 p.m. ET, the 2-year Treasury yield was up 2.9 basis points at 3.8274%. The 5-year Treasury yield was up 2.6 basis points at 3.9519%. The 10-year Treasury yield was up 2.0 basis points at 4.3224%. The 30-year Treasury yield was up 0.9 basis points at 4.9132%. The yield spread between 5-year and 30-year Treasuries narrowed by approximately 1.7 basis points to 95.96 basis points. The yield spread between 2-year and 10-year Treasuries narrowed by about 0.5 basis points to 49.29 basis points.
Comments