The 10 yr note auction was very good. The yield of 4.580% was just below the when issued pricing of 4.586%. The bid to cover of 2.59 was above the previous one year average of 2.49 and the best since last September. Also of note, dealers got stuck with the least amount of a 10 year auction since January with direct and indirect bidders taking the most since then.
Bottom line, while auction results really only have an impact on the market the day of the issuance, it’s very likely that buyers took advantage of a 10 yr yield that is nearing its Middle East conflict high and not far from the highest since January 2025.
With respect to the reaction in the TIPS market to today’s rise in oil prices, the 10 yr inflation breakeven is unchanged at 2.26% and the 5 yr is flat as well at 2.32%. It’s the shorter end that is responding more with the 2 yr breakeven up 6 bps to 2.10%
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