Treasuries Fall Amid Corporate Issuance Surge; Curve Steepens

  • 30-year yield on pace for highest closing level this year
  • Treasury auction cycle begins Tuesday with three-year notes

Treasuries fell in U.S. trading Monday, erasing gains led by German and other core euro-zone bonds as the corporate issuance calendar swelled.

Yields were higher led by the longest-maturity issues, with the 10-year yield up by about a basis point at 2.49 percent at 3:20 p.m. in New York. It declined as much as 2.3 basis points during European trading versus a drop of as much as 3.7 basis points for the German 10-year after Alain Juppe declined to consider replacing Francois Fillon in the French presidential election, sparking demand for haven assets. The 30-year yield, 3 basis points higher at 3.10 percent, was on pace for its highest closing level this year.

  • Yields climbed as 11 companies including McDonald’s and Nordstrom slated bond offerings, 8 of which included 10Y and/or 30Y tranches
  • 5s30s curve steepened by more than 2bp to 108bp, extending rebound from YTD low close at 105.6bp on March 2
  • Earlier yield declines extended Friday’s move spurred by Yellen comments validating market expectations for a March 15 rate increase
  • Several banks have made bearish calls on USTs since Friday, including Morgan Stanley, which recommended a short position in 5Y based on expectation FOMC will revise its forecasts to call for more rate increases in 2018, and JPMorgan, which advocated 2s5s steepener based on Fed’s shift in tone
  • This week’s key events for the market lie ahead, with 3Y/10Y/30Y auction cycle beginning Tuesday and February employment data including ADP Employment Change on Wednesday and jobs report Friday
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