Treasuries Fall as GDP Revised Higher; TIPs Auction Draws Demand

Treasuries fell after data showed the U.S. economy expanded more quickly in the third quarter than previously projected.

  • Yields globally edged higher as the European Central Bank paused its bond-buying program for 2016, taking around 3.3 billion euros($3.4 billion) of daily activities out of the European government-debt market. The decline in bonds continued as institutional investors such as mutual funds and foreign central banks bought 81 percent of the five-year Treasury Inflation-Protected Securities auctioned Thursday, a record.
  • Two-year yields rise less than 1 basis point to 1.19 percent; 10-year yields rise one basis point to 2.55 percent
  • USTs reached session lows shortly after GDP; subsequent drop in 10-year futures stalled at Wednesday’s 123-00+ lows
  • 5-year TIPS auction met strong demand, with, breakevens subsequently rising ~4bp to session highs
  • Leading up to auction, large $500k/DV01 block sale in 5-year UST futures observed
  • USD swap spread curve flattened with 10Y, 30Y close to 1bp tighter while 2Y spreads widened by ~1bp, rising through

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