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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.

10-Year Treasury Yield – Intraday Chart

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.