US 10-year Note Auction Yield Declines To 2.34%, Trump Press Conference Dominates

In the latest 10-year $20bn US Treasury note auction, the yield declined to 2.34% from 2.49% at the December 12 auction. There was an increase in the bid/cover ratio to 2.58% from 2.39% previously which was above the average of the previous five auctions.

Indirect bidders took 70.5% while direct bidders bought 8.7%. The allotment to dealers was 20.7% which was well below the average seen over the past year and suggested strong demand at these yields.

The auction was relatively strong in the historic context and Treasury markets ticked higher after the announcement with the 10-year note continuing to rally.

The note auction was, however, overshadowed by substantial currency moves following President-elect Trump’s press conference. The US currency had moved sharply higher into the press conference with USD/JPY peaking above 116.80, but then reversed course with disappointment that there was no mention of fiscal stimulus or tax cuts during the press conference.

USD/.JPY dipped below 115.00 which triggered aggressive sell stops and lows around 114.25 soon after the auction results. US equity markets also lost ground with the S&P 500 index in negative territory.

In this environment, there was renewed demand for bonds and the 10-year note recorded gains of around 13 ticks with the yield declining to fresh 1-month lows around 2.33%.

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.