Trader Talk

Pisani: The Brief 10-Year Auction Rally


Surprise! Stocks staged a modest rally — before slipping back on Fed rate-hike comments — on the results of the 10-year Treasury auction, which yielded 3.90 percent, above expectations of a yield of 3.94 to 3.95 percent. (See: 10-Year Notes Auction Sees Strong Demand)

Indirect Bidders (generally viewed to be central banks) was 43.1 percent, well above the average of 40.6 percent. Traders note that before the auction an indirect greater than 40 percent would be viewed as positive. Bidding was spirited: the Bid/Cover, at 3.72, was well above the prior auction of 3.45. and the one year average of 2.81.

Most traders I talked to were surprised by the results. Many felt that with the Fed no longer buying mortgages, there would be more of a supply of fixed income products on the markets, which would put upward pressure on rates across the board.

Simply put: there's a lot more products to throw your money at — the 10 year at 3.90 percent yield is not as attractive as it was.

Others note that with the yield at 3.65 percent just a short while ago, we have already backed up quite a bit. Even here, it’s still the highest yield since last summer.

30-year auction tomorrow.

Another hot topic: gold, up over 4 percent in the past 5 trading sessions, even as the dollar has strengthened. This, gold bugs insist, is the ultimate sign of real gold strength. Why now? Plenty of theories, but the one that makes the most sense is that euro holders are getting worried about their positions, but still not convinced the dollar is on a long-term upward trajectory, are deciding to transfer euros directly into gold.

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D.R. Horton 




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