Treasury Department auctions $26B of 2-year notes at a high yield of 1.316%


U.S. government debt prices erased slight gains on Tuesday, as investors digested news out of Donald Trump's first overseas trip as President as well as fresh supply.

The Treasury Department auctioned $26 billion in two-year notes at a high yield of 1.316 percent, its highest since September 2008. The bid-to-cover ratio, an indicator of demand, was 2.90, its highest since May 2016.

Indirect bidders, which include major central banks, were awarded 57.2 percent. Direct bidders, which includes domestic money managers, bought 12.4 percent, the most since February.

"Stats were stronger than average to be sure, but very similar to April auction results where we stopped through 0.2bp. Overall a solid event though we're still not fans of the 2-year until the Fed meeting next month has passed," said Aaron Kohli, interest rate strategist at BMO.

The two-year note yield traded around 1.3 percent after the sale. Meanwhile, the yield on the benchmark 10-year Treasury note sat slightly higher at around 2.273 percent at 1:04 p.m. ET, while the yield on the 30-year Treasury bond climbed to 2.932 percent. Bond yields move inversely to prices.


As part of his first foreign trip abroad as President, Trump visited Middle East. After Trump touched down in Israel on Monday he said there was a "rare opportunity" now to bring security, stability and peace to the Middle East region and its citizens.

On Tuesday, the president traveled to Bethlehem to meet the Palestinian President Mahmoud Abbas. The U.S. president will be in Europe for the rest of his trip.

In the central bank space, Minneapolis Fed President Neel Kashkari and Philadelphia Fed President Patrick Harker are set to speak on Tuesday. Harker will discuss the economic outlook at the Harvard Club of New York City, in New York.

On the data front, new home sales fell 11.4 percent in April, far more than the expected drop of about 1 percent. IHS Markit Flash US Composite PMI index hit a three-month high in May, reaching 53.9.

With members of OPEC set to meet in Vienna this Thursday, investors are keeping a watchful eye on the oil market this week.

On Tuesday, U.S. crude was erased earlier losses, hovering around $51.21, while Brent stood around $53.89 per barrel. Prices fell earlier on Tuesday after President Trump proposed the sale of half the U.S.'s strategic oil reserves.

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