10 yr auction solid

With the last big economic data point out of the way through year end, the 10 yr note auction was solid. The yield of 4.235% was below the when issued pricing of 4.252%. The bid to cover of 2.70 was well above the year average of 2.52. And, direct and indirect bidders took down about 90% of the auction, around the most since August 2023.

Bottom line with some clarity, whether good or not, with the growth and inflation data this month, the buyers came out to play in the longer end of the yield curve. That said, at 4.24%, the off the run 10 yr yield is unchanged in response and is exactly where it was at 8:29am today right before CPI hit the tape. It’s the 2 yr yield that more reacted with it currently sitting at 4.14% vs 4.17% right before the inflation print. The spread between the two is up by 2 bps to 10 bps, a 3 week high. Rate cut odds for next week are now at 95% but with an expected pause in January.