Interesting day in the bond market
The Treasury will jump into 20-year sales today for the first time in 34 years.
The initial auction of $20 billion is a relatively large one and is a reminder of how much debt the US is piling on. The notes are trading at 1.230%-1.220% on the bid/ask in the when-issued market. That puts them much closer to 30-year bonds (1.44%) than 10-years (0.71%).
“An auction concession of some sort is warranted; although we anticipate the new issue will be well absorbed even if it comes at a modest discount,” writes Ian Lyngen, head of US rates strategy at BMO.
The broader bond market is reluctant to send and clear signals at the moment. 10s have been in a tight range for six weeks now and it’s tough to envision a clear break on either side because you have inflation keeping yields up and the Fed keeping them down.