10-Year Notes Auction Result Is Pointing Toward Market Stability
Tuesday's 3-year notes auction, Wednesday's 10-year notes auction, and Thursday's 30-year bond sale are 3 of the most closely watched auction that will be happening this week due to the recent focus on bond yields which have been a key driver of stock movements.
We saw that on Tuesday, the $58 billion auction in 3-year notes was well-received, attracting demand that is well above average. This can be seen from the bid-to-cover ratio, which acts as an indicator of demand, where we saw a ratio of 2.69 for Tuesday's auction, which is stronger than both the 2.39 ratio we saw in February as well as the average ratio of 2.40. This temporarily eased the fear of an uncontrollable rise of velocity in the surge of bond yields.
I believe today's $38 billion auction in 10-year notes has helped to further calm such uncertainty.
Following today's auction, the Treasury sold $38 billion in 10-year notes at a yield of 1.523%, with bidders seeking $2.38 for every $1 on offer from the government. This means that the bid-to-cover ratio stand at 2.38, which is nearly on par with last month's 10-year notes auction ratio of 2.37, but lower than the average taken from the last 10 previous 10-year notes auction ratio of 2.42.
While this does not indicate above average demand like what happened yesterday with the 3-year notes auction, it does shows that today's auction has demand that is consistent with recent auctions. This is a good thing because one of the things that market participants are fearful for is unpredictability and instability caused by more weak auctions that are not within expectations like what we saw in late February's auction of 7-year notes where an unexpectedly weak auction caused the market to sell-off.
As such, given today's average 3-year notes auction that was within expectations in combination with the lower than expected core CPI data that was released earlier today, the fear surrounding the bond market is temporarily put to a halt once again.
Tomorrow's $24 billion sale of 30-year bond will be the last straw of the week that could potentially move the market significantly in either direction. Market participants in the stock market should continue paying close attention to the situation surrounding the bond market because I believe that Treasury yields and the result of bond auctions will continue acting as an indicator of the general direction of the broader stock market throughout this week.
Invest safe.
This is not investment advice so please do your own due diligence!
Support this idea with likes and share your thoughts below.
We saw that on Tuesday, the $58 billion auction in 3-year notes was well-received, attracting demand that is well above average. This can be seen from the bid-to-cover ratio, which acts as an indicator of demand, where we saw a ratio of 2.69 for Tuesday's auction, which is stronger than both the 2.39 ratio we saw in February as well as the average ratio of 2.40. This temporarily eased the fear of an uncontrollable rise of velocity in the surge of bond yields.
I believe today's $38 billion auction in 10-year notes has helped to further calm such uncertainty.
Following today's auction, the Treasury sold $38 billion in 10-year notes at a yield of 1.523%, with bidders seeking $2.38 for every $1 on offer from the government. This means that the bid-to-cover ratio stand at 2.38, which is nearly on par with last month's 10-year notes auction ratio of 2.37, but lower than the average taken from the last 10 previous 10-year notes auction ratio of 2.42.
While this does not indicate above average demand like what happened yesterday with the 3-year notes auction, it does shows that today's auction has demand that is consistent with recent auctions. This is a good thing because one of the things that market participants are fearful for is unpredictability and instability caused by more weak auctions that are not within expectations like what we saw in late February's auction of 7-year notes where an unexpectedly weak auction caused the market to sell-off.
As such, given today's average 3-year notes auction that was within expectations in combination with the lower than expected core CPI data that was released earlier today, the fear surrounding the bond market is temporarily put to a halt once again.
Tomorrow's $24 billion sale of 30-year bond will be the last straw of the week that could potentially move the market significantly in either direction. Market participants in the stock market should continue paying close attention to the situation surrounding the bond market because I believe that Treasury yields and the result of bond auctions will continue acting as an indicator of the general direction of the broader stock market throughout this week.
Invest safe.
This is not investment advice so please do your own due diligence!
Support this idea with likes and share your thoughts below.
