U.S. Treasuries Rise Across the Curve as 3-Year Auction Draws Strong Demand
U.S. Treasuries edged higher Tuesday as developments in the Middle East sent oil prices swinging sharply before they ultimately closed higher. Demand was strong at the Treasury’s 3-year auction, while several positioning indicators suggested Treasuries could stage a strong rally if Wednesday’s July CPI report is soft. Just after 3 p.m. New York time, Treasury yields were broadly 2 to 3 basis points lower, reversing part of Monday’s increase driven by higher oil prices. WTI crude futures settled 1.3% higher at a new monthly high after rising as much as 3% earlier in the session. The U.S. Treasury sold $58 billion of 3-year notes, the first coupon-bearing note auction of the August-to-October financing quarter. The auction stopped at a 4.291% yield, below the 4.296% pre-sale trading level at the 1 p.m. bidding deadline, indicating demand was slightly stronger than expected. The stop yield was also the highest for a note of that maturity since the February 2025 auction. Overnight index swap rates tied to Federal Reserve meeting dates declined. The 2027 contract reflected a roughly 3-basis-point reduction in expectations for cumulative rate hikes over the coming months, although markets still had almost fully priced in two 25-basis-point rate increases by mid-2027. Flows in the short-term interest-rate options market remained tilted toward establishing new upside hedges while closing put positions. As of 3:25 p.m. Eastern time, the 2-year Treasury yield was 4.22%, the 5-year yield was 4.3906%, the 10-year yield was 4.6904% and the 30-year yield was 5.2413%. The 2-year/10-year yield spread was 46.83 basis points, while the 5-year/30-year spread was 84.9 basis points.
Just after 3 p.m. New York time, Treasury yields were broadly 2 to 3 basis points lower, reversing part of Monday’s increase driven by higher oil prices. WTI crude futures settled 1.3% higher at a new monthly high after rising as much as 3% earlier in the session.
The U.S. Treasury sold $58 billion of 3-year notes, the first coupon-bearing note auction of the August-to-October financing quarter. The auction stopped at a 4.291% yield, below the 4.296% pre-sale trading level at the 1 p.m. bidding deadline, indicating demand was slightly stronger than expected. The stop yield was also the highest for a note of that maturity since the February 2025 auction.
Overnight index swap rates tied to Federal Reserve meeting dates declined. The 2027 contract reflected a roughly 3-basis-point reduction in expectations for cumulative rate hikes over the coming months, although markets still had almost fully priced in two 25-basis-point rate increases by mid-2027.
Flows in the short-term interest-rate options market remained tilted toward establishing new upside hedges while closing put positions.
As of 3:25 p.m. Eastern time, the 2-year Treasury yield was 4.22%, the 5-year yield was 4.3906%, the 10-year yield was 4.6904% and the 30-year yield was 5.2413%. The 2-year/10-year yield spread was 46.83 basis points, while the 5-year/30-year spread was 84.9 basis points.