Market Update 10 27 09: The Treasury auctions are going well

 

The Auction

 

The US Treasury is in the process of auctioning $123 billion worth of securities in 4 separate auctions this week.  The size of this auction was a cause for concern in the market recently and provided some fuel for the selloff we experienced along the length of the Treasury curve.  Yesterday the 10-year Treasury traded above the 3.50% level for the first time since August, and traded as high as a 3.57% on the day. 

 

So far the auctions have gone very well.  From the activity we’ve seen thus far it would appear that the market has a bottomless appetite for Treasuries.  The first two auctions were very well attended, so well in fact that our lead trader couldn’t remember a 2-year auction with such strong activity.  They auctioned a record $44 Billion in 2-year notes with demand that far exceeded the average for the last 10 auctions.  So the market rallies today, erasing much of yesterday’s gains in yield.  The 10-year Treasury at a 3.47%, around 10 bps lower than yesterdays high. 

 

What’s on deck?

 

There are more auctions to go and we’ll have to wait and see if all maturities receive the same type of welcome or if there is just huge demand for the short stuff.  Tomorrow we see the sale of $41 Billion in 5-year notes, and Thursday brings the sale of $31 Billion of 7-year notes.

 

The next Fed meeting is November 4^th, with results released at 2:15 PM Eastern time. 

 

If you have any questions or if there is anything I can be doing for you just let me know.