U.S. bonds rally after 30-year auction finds solid demand
TLT•U.S. Treasuries rose after a 30-year bond auction drew solid demand, with the 10-year yield down 5 basis points to 5.227%. The auction’s bid-to-cover ratio was 2.54, above the 2.41 average of the previous six auctions.
1. Auction supports bonds
Treasuries rose on Thursday after the 30-year bond auction met with solid demand. The issue priced at a 5.618% yield, below the expected rate at the bid deadline. Its bid-to-cover ratio was 2.54, compared with an average of 2.41 over the previous six auctions; indirect bids took 72.3% of supply, up from a 69.1% average.
2. Yields and Fed outlook
The 10-year Treasury yield fell 5 basis points to 5.227%, while the 30-year yield declined 5.9 basis points to 5.602%. The 2-year yield dipped 1.3 basis points to 4.751%. Fed Governor Christopher Waller said additional rate hikes will likely be needed to lower inflation to the Fed’s 2% target, while noting flexibility about the pace of increases.
3. Oil remains a driver
Brent crude settled up 3.7% at $103.92 a barrel, and U.S. crude futures ended up 3.4% at $91.17. The spread between 2-year and 10-year yields narrowed to 47.1 basis points from 51.4 basis points.
