Treasuries Recover After 7-Year Auction Sees Record Indirect Bidby
Benchmark U.S. yields remain close to highest this month
Early losses led by European debt on strength in U.K. GDP
Treasuries rallied after an auction of $28 billion in seven-year notes drew a record amount of buying from indirect bidders, signaling interest from foreign central banks and mutual funds.
The benchmark 10-year yield fell about 1 basis point to 2.5 percent at 4:20 p.m. in New York, according to Bloomberg Bond Trader data. It climbed as much as 4 basis points earlier, reaching the highest since December.
“Nothing in recent 10-year volume suggested anything like this interest,” Jim Vogel, head of interest-rate strategy at FTN Financial in Memphis, Tennessee, wrote in a note. The Treasury market had rallied into the auction, making the result even more surprising, he said.
- Large 10-year futures block buyer immediately following the auction results extended gains
- USD swap spreads again aggressively widened to year-to-date highs, led by long end in what looks like continued convexity-related paying flows in 10-year and out
- U.S. yield curve from five to 30 years little changed at about 112 basis points
- Early losses in Treasuries spurred by stronger-than-expected U.K. GDP, with 10-year debt lower across much of Europe
- In U.S. economic data, jobless claims rose by 22,000 to 259,000 in the period ended Jan. 21, a four-week high, Labor Department data showed
- Economic data have tended to exceed expectations this year, explaining why U.S. yields touched December levels; Citigroup Inc.’s U.S. Economic Surprise Index has remained close to the highest level since 2014