Janet Yellen welcomed two consecutive favorable auction results during the final week of 2023.
On the heels of a solid reception for Tuesday’s two-year sale, $58 billion in five-year notes went over pretty well on Wednesday, all things considered.
Although Thursday’s $40 billion seven-year sale tailed, spoiling hopes for a clean sweep of this week’s auction slate, the passable results for the two- and five-year supply events were encouraging, even as they likely reflected expectations for lower yields in 2024 as the Fed cuts rates. Market pricing for those cuts remains much more aggressive than the December dot plot.
Do note: The largest Treasury ETF was on track for a second consecutive 9.5% monthly gain. As the figure below shows, that’s exceedingly rare.
If you endeavored to catch the falling bond knife in October, congratulations: You happened upon one of the single-largest two-month rallies in the history of that simplest of simple products.
(If only there were someone writing daily for public consumption who suggested, in October, that bonds were a falling knife worth catching. And if only that person had said as much repeatedly.)
The week between Christmas and New Year’s isn’t famous for market news flow, and I’m admittedly scraping the barrel a bit here, but Wednesday’s Treasury rally (helped along by the five-year stop through) was meaningful.
10s were richer by almost 10bps Wednesday, when yields slipped below 3.80% to the lowest since July.
Notice anything amusing about that chart? On December 30, 2022, 10-year US yields were 3.88%. On Wednesday, they were 3.89%.
“We can’t help but appreciate the fact that 10-year yields are currently trading within a single basis point of where they closed 2022,” BMO’s Ian Lyngen and Ben Jeffery remarked. “Nothing to see here.”
“If you endeavored to catch the falling bond knife in October, congratulations: You happened upon one of the single-largest two-month rallies in the history of that simplest of simple products.
(If only there were someone writing daily for public consumption who suggested, in October, that bonds were a falling knife worth catching. And if only that person had said as much repeatedly.)”
Again, thanks. With the usual caveat that you don’t give investment advice and your readers, no doubt, consider other sources, you had a strong hand in me achieving a gain deep into six figures the past three months. Thank you.
You aren’t charging enough.
I caught that knife, a little (and throughout 2023). Wish I had been bolder, though.
I collect munis (hate taxes) and also in October I managed to receive notice of a new issue of insured munis paying 5.375% with ten years of call protection. I bought a whole lot of these, fortunately. Now two months later new munis of a similar type are coming to market at 4%! I wish I had held out my hands for more of that knife. I’ll own these babies when I die.