**Treasury auctions collapse amid rising yields, mortgages, banks, credit** [developing]
Key Questions
Why did the recent Treasury auctions fail?
The $119B and $82B auctions flopped due to weak demand, marking the weakest 3-year auctions in years amid dealer squeezes. Rising yields and foreign selling exacerbated the poor performance.
What is causing foreign investors to dump US Treasuries?
Foreign entities dumped over $90B, with Japan unwinding yen carry trades ($1.225T exposure), China, and G7 shifting to RMB at 2012 lows, influenced by petrodollar and Iran risks. This selling pressure contributed to auction failures.
What is the current 10-year Treasury yield level?
The 10-year yield reached 4.344% following the March jobs report of +178k jobs. A recent -10bps rally occurred beforehand, but yields nudged higher post-data.
How are mortgage rates and applications affected?
Mortgage rates have climbed above 6.3%, leading to declining applications. Higher yields from Treasury sell-offs are pushing borrowing costs up.
What advice do UBS and Ned Davis provide on bonds?
UBS and Ned Davis recommend buying dips only above 4.5% yields or with wider spreads. They suggest tactical short-duration strategies and bond ladders while deferring refinancings.
Why are foreign central banks selling Treasuries?
Foreign central banks and institutions are dumping Treasuries due to yen carry unwinds, petrodollar strains from Iran tensions, and shifts like G7 to RMB lows. This has led to over $90B in sales recently.
What strategies are suggested for navigating rising yields?
Tactical short-duration positions and bond ladders are advised to manage interest rate risk. Investors should defer refinancings amid elevated mortgage rates and auction weakness.
How has the jobs report impacted bond yields?
The strong March jobs report of +178k jobs nudged Treasury yields higher, with the 10-year at 4.344%. It reversed a recent short-term rally of -10bps.
$119B/$82B auction flops, $90B+ foreign dump ($1.225T Japan/yen carry unwind/China/G7 RMB to 2012 lows, petrodollar/Iran), weakest 3yrs, dealer squeeze; 10yr 4.344% post-jobs (+178k, recent -10bps rally), mortgages 6.3%+ (apps down); UBS/Ned Davis: dip buys >4.5%/wider spreads; tactical short-dur/ladders, defer refis.