US 5-years weaker than 2’s

One week ago the US five year bonds were trading north of +1.22%. Today, these notes are offering close to +1% in yield. Falling equities and perhaps the weaker than expected US durable goods report this morning seems to have provided a stronger bid for safe-haven product. US Treasury prices have continued to fluctuate before today’s government sell of $35-billion in five-year securities, the second of three note sales this week totaling $99-billion. Also aiding to push the US yield curve lower is the Fed buying +$4.81-billion of Treasuries today due from August 2020 to November 2021.

This afternoon’s 5-year note auction pales in comparison to yesterday’s strong 2-year note sale. Perhaps the strong premarket interest negated some of the demand at auction time. The +$35-billion note sale was taken down at a yield of +1.04% and it’s the “first tranche that went off about +1% since October”. Pre-auction, five year product was trading at +1.026%, implying that the take down was rather soft. The bid-to cover (a gauge of overall demand) was 2.85, compared to the 3.02 average of the previous four-sales. The indirect bid (a proxy of foreign demand) was 41.9% versus a four-auction average of 45.3%. The direct bid was 11.3%

Economic Indicators

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell