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Bonds: US debt auctions see reasonable demand, according to analysts

By Alexander Bueso

Date: Wednesday 21 Feb 2018

Bonds: US debt auctions see reasonable demand, according to analysts

(ShareCast News) - These were the movements in some of the most widely-followed 10-year sovereign bond yields:

US: 2.89% (+1bp)

UK: 1.59% (-1bp)

Germany: 0.74% (+0bp)

France: 1.0% (+1bp)

Spain: 1.53% (+2bp)

Italy: 2.07% (+3bp)

Portugal: 2.05% (+3bp)

Greece: 4.40% (+13bp)

Japan: 0.07% (+1bp)
Gilts outperformed on Tuesday, ahead of the the release of the latest employment data the following day.

Elsewhere, traders were playing it safe ahead of a strong pipeline of US Treasury auctions scheduled for throughout the week, including $151bn of bills of varying maturities and the sale of $28bn in two year notes.

Longer-term yields on both sides of the Atlantic ended the session well of their intra-day highs, recovering from early selling in anticipation of increased supply Stateside, with some traders describing demand at those auctions as relatively decent.

However, the two-year issue was priced at a yield of 2.255% - the highest in roughly 10 years - versus the going rate of 2.19% the day before. In the market, two-year yields ended the day at 2.22%.

Acting as a backdrop, markets were also waiting on the release of the minutes of the Federal Reserve's last policy meeting, the next day, although according to Jim Reid at Deutsche Bank they were likely to be "outdated" given recent strong prints on hourly earnings and inflation.

In particular, investors were trying to discern any bias towards a possible shift higher in US rate-setters' projections for growth, inflation and interest rates when they submitted their next set of economic projections on 20-21 March.

To take note of, the Spanish Treasury's launch of a 30-year bond was met with strong demand, with Madrid receiving €25.8bn-worth of bids (including interest for €2.45bn from the joint lead managers themselves) for the €6.0bn of debt on offer, at a price of 105 basis points over mid-swap.

Also of interest, Riksbank Deputy Governor Martin Floden said "we have to be cautious moving forward not to surprise markets too much (on rates) and generate negative market reactions....for example...too rapid appreciation of the Krona."

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