by Rom Badilla, CFA – Bond Trader and BondSquawker:
U.S. Treasuries rallied today as the curve steepened, led by a decline in yields on the front-end. The yield on the 2-Year declined by almost 2 basis points to close the day at 1.05 percent. The belly outperformed the rest of the maturity spectrum as the yield on the 5-Year closed at 2.56 percent, a tightening of more than 2 basis points. The long-end of the curve see-sawed throughout the session and was unchanged for the day despite the news from across the Atlantic. The yield on the 10-Year and Long Bond ended the session at 3.81 and 4.67 percent, respectively.
In the first of four auctions slated for this week totaling $118 billion, the U.S. Treasury sold $11 billion of 5-Year Inflation Protected Securities, or TIPS. Today’s auction drew a yield of 0.55 percent and a bid-to-cover ratio, which is a gauge of demand by investors, of 3.15. The average of the last five auctions had a bid-to-cover ratio at 2.44.
Tomorrow, the Treasury will sell off $44 billion of 2-year notes followed by auctions for the 5-Year on Wednesday, followed by the 7-Year on Thursday.
Stocks were down led by a decline in the financial sector. Shares of Citigroup and Goldman Sachs dropped by 5.1 and 3.4 percent, respectively. The S&P500 declined by 0.4 percent to 1212.05. The Volatility Index aka VIX ended 17.47, much higher from the previous close of 16.62.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.