To The Moon

US Treasuries finished near their session lows after Reuters reported that the State Department was preparing to order the departure of some personnel and family members from US embassies in the Gulf region.

Washington later denied it was evacuating embassy staff from the entire Persian Gulf, with the State Department saying the instruction was limited to Saudi Arabia.

Short- and intermediate-dated Treasuries led the decline, extending the curve's earlier flattening trend.

Longer-dated US government debt showed little reaction to an earlier 20-year note auction, which cleared at a yield nearly 1 basis point above the when-issued level.

Just after 3pm in New York, short- and intermediate-dated Treasury yields were up 5 basis points while long-end yields rose about 2 basis points, narrowing the 2s10s and 5s30s spreads by 0.8 basis point and 2.5 basis points respectively on the day.

Most of the day's move came during the US afternoon session, after reports emerged of the partial evacuation of personnel from US embassies in the Gulf region.

Sentiment soured, stocks gave back gains and oil prices resumed their climb.

The 20-year Treasury auction cleared at a yield 0.9 basis point above the when-issued level, although the long end showed a limited response to the result.

Even though the clearing yield was above the when-issued level, the bidding metrics were solid; primary dealers were allotted 10.3%, below the prior three auctions, indirect bidders took 58.2% and direct bidders 31.6%.

In the US morning session, price action was range-bound, though one trade stood out at the short end, with a large seller in November federal funds futures at an implied rate of 3.92%.

In the US Treasury options market, a notable trade was a $12 million volatility transaction executed via December straddles.

As of 4:44pm New York time, the 2-year Treasury yield was up 2.8 basis points at 4.8038%; the 5-year yield was up 2.2 basis points at 4.9506%; the 10-year yield was up 0.9 basis point at 5.1169%; the 30-year yield was down 1.2 basis points at 5.4078%; the spread between 5- and 30-year yields narrowed about 3.4 basis points to 45.54 basis points; and the spread between 2- and 10-year yields narrowed about 1.9 basis points to 30.88 basis points.