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Bond Auction Tails for Fourth Time

US TSYS SUMMARY
Thursday's trade felt more animated despite lighter volumes (TYU<885k after the bell) compared to Wed that saw nearly twice the volume and in-line July CPI and lower than est core CPI (0.3%).
  • Tsy futures extended early session lows after PPI came out higher than forecasted (+1.0% vs. +0.6%), weekly claims as expected (-12k to 375k), while continuing claims -.114m to 2.866M. Rates held narrow range on two-way trade through midday in anticipation of 30Y bond auction.
  • Yield curves bear steepened as bonds sold off/extended session lows after the fourth consecutive 30Y auction tail: 2.040% vs. 2.030% WI; 2.21x bid-to-cover off 2.29x 5 auction avg.
  • Performance not as poor as the prior July auction's 2.8bp tail, or 1.8bp 3 month average for that matter -- probably what spurred round of buying/short-set unwinds in minutes after results.
  • Bond futures remain weaker but off lows amid renewed selling in 10s and 30s from misc accts includes prop and fast$. No deal-tied hedging after $40B high-grade debt issued in first half of the week.
  • The 2-Yr yield is up 0.6bps at 0.2247%, 5-Yr is up 2bps at 0.8278%, 10-Yr is up 3.4bps at 1.364%, and 30-Yr is up 1.3bps at 2.0114%.
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