Treasury yields showed little reaction to the three-year auction which showed strong demand for US debt. The bid-to-cover ratio improved to 2.62, which was highest levels in 2019. Recent focus on Treasuries have been with some countries reducing their US holdings. Russia and Turkey have steadily reduced their positions for high-quality US paper, but it appears the rest of the world still favors Treasuries.
The 10-year Treasury yield is down 0.5 basis points at 2.143%, while the 2-year yield is 2.0 basis points higher at 1.924%. The yield curve inversion between the 3-month and 10-year yields is continuing to improve and now stands at 12 basis points. The 10-year and 2-year spread, which has yet to invert in this cycle has narrowed to 21.95 basis points.
Rate cut expectations are still leaning towards a July cut, with markets seeing a 75.8% chance of a rate cut. The US dollar is slightly softer on the day, with the biggest declines to the British pound and euro.
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Ed Moya
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