Bonds Improve After Treasury Auctions

Treasury auctions don't always cause a reaction in bonds, but they did today. This has less to do with the results being remarkable and more to do with the fact that there were two big auctions on a Monday (as opposed to the typical auction schedule that plays out Tue-Thu) as well as the fact that there's not much else going on in terms of data due to the shutdown. In hindsight, we can see the market likely built in a small concession ahead of these auctions, and the concession was traded back out after the auction results printed. One final way we know the auctions are having an impact is via the outperformance of MBS. Since MBS aren't weighed down by a big glut of new supply, they were free to outperform both 10 and 5yr Treasuries--something like probably would not have happened so decisively in the absence of the auction cycle.