3-Year Auction Shows Treasuries Still in High Demand

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

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya