The trend of strong 10-year auctions and soft 30-year auctions continues

Tough one to make sense of

For the past half year there has been a consistent trend of strong 10-year US auctions and weak 30-year sales.

In theory, markets should adjust to that but for some reason they aren’t.

The reaction in the FX market, we witnessed the US dollar weakness on the particularly strong 10-year auction yesterday (the stop through was the largest since 2012) but we’re only seeing a small gain in the US dollar on this sale.

In any case, when next month’s auctions come up, keep an eye out for the same pattern.

In the bigger picture, US 10-s look like they’re going to be consolidating for awhile. I just can’t see a break of 1.12% again, given the inflation dynamics and looming taper.

Tough one to make sense of

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