To The Moon

US government bonds closed higher on Monday, buoyed by a sharp decline in oil prices. However, the gains were limited by upcoming 2-year and 5-year note auctions and a wave of new corporate bond issuance.

With the Federal Reserve's interest rate decision looming on Wednesday, the market lacked fundamental catalysts, and trading volumes in Treasury futures were below average. In late trading, US Treasury yields fell between 1.5 and nearly 4 basis points from intraday lows. Treasury futures volumes ranged from 74% to 93% of their 20-day average.

The main catalyst for the drop in global government bond yields was a plunge in oil prices, triggered by the US halting airstrikes on Iran. WTI crude oil futures fell 7.5%, and Brent crude dropped 8.7%, with both settling at their lowest levels since July 17.

The final round of coupon-bearing bond issuance for the Treasury's May-July financing quarter was brought forward by one day to be completed before the Federal Open Market Committee's rate decision on Wednesday. The stop-out yields for the $69 billion 2-year note and $70 billion 5-year note auctions both hit their highest levels since December 2024. The 2-year auction's stop-out yield was about 0.5 basis points lower than the pre-auction trading level, while the 5-year auction's yield was about 0.8 basis points higher.

A pause in corporate bond issuance came to an end, with five companies collectively issuing $16.2 billion in bonds on Monday. The largest deal was a $12.3 billion data center financing transaction by Sopaipilla Investor.

As of 3:45 PM Eastern Time, the 2-year Treasury yield stood at 4.3158%; the 5-year yield at 4.397%; the 10-year yield at 4.6385%; and the 30-year yield at 5.1218%. The spread between the 2-year and 10-year yields was 32.06 basis points, while the spread between the 5-year and 30-year yields was 72.31 basis points.