Treasury yields on the short and intermediate segments of the curve hovered near their daily highs Tuesday afternoon, as crude oil regained upward momentum following fresh Middle East strikes. A solid auction of 3-year notes drew steady demand, while the market now looks ahead to 10-year and 30-year supply slated for Wednesday and Thursday, respectively. Corporate bond issuance also added to supply pressure, with 18 issuers bringing a combined $38.6 billion to market.
Just past 3 p.m. in New York, yields on the front and middle portions of the curve climbed as much as 3 basis points, marking the steepest losses across those tenors and pushing the 2s10s spread about 1.2 basis points tighter relative to Friday's close. The benchmark 10-year yield traded near 4.795%, roughly 2 basis points higher on the day. In the final stretch of the session, reports of explosions near Iran's Kharg Island triggered a selloff that produced the heaviest trading volume of the day. Following the news flow, 10-year Treasury futures volume spiked, with roughly 20,000 contracts changing hands within a single minute—the most active minute of the session.
The $58 billion 3-year note auction came in solid, with the high yield landing slightly below where the issue traded in the when-issued market. Bidding metrics looked healthy: primary dealers took down 10.9% of the supply, down from the prior sale, while direct bidders stepped up to 26.9% and indirect bidders eased to 62.1%. In the SOFR options space, one notable trade appeared to wager that current market pricing for a rate hike at next week's September policy meeting is excessive; the option's expiration covers this week's PPI and CPI releases.
As of 4:59 p.m. Eastern time, the 2-year Treasury yield rose 2.8 basis points to 4.3936%. The 5-year yield gained 1.8 basis points to 4.5627%. The 10-year yield advanced 0.6 basis points to 4.7882%. The 30-year yield added 0.3 basis points to 5.2454%. The 5s30s spread narrowed roughly 1.5 basis points to 68.1 basis points, while the 2s10s spread tightened about 2.1 basis points to 39.25 basis points.
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