Ten-year Treasury notes
The US Treasury Department conducts its auction of ten-year Treasury Notes (or T-notes) once every month. The yield on the ten-year T-notes is considered the benchmark yield in the financial market. The note is a popular debt instrument in the world because it’s backed by the US government’s guarantee.
Investors can invest in mutual funds such as the Vanguard Long-Term Treasury Fund Shares (VUSTX), which invests at least 80% of its assets in US Treasury securities. This fund provided a week-over-week return of 1.45%. It has a modified duration of 16.8 years. Also, American Funds US Government Sec A (AMUSX), which invests in government securities, has provided a week-over-week return of 0.38% and a year-to-date return of 0.86%.
- On July 8, ten-year Treasury notes worth $21 billion were auctioned—the same as the previous week.
- The coupon rate came in at 2.125%, with no change compared to the previous month.
- High yield stood at 2.225%, lower than the 2.461% in the June auction.
- The bid-to-cover ratio fell marginally compared to the previous month. The ratio was 2.72x versus 2.74x in June. The bid-to-cover ratio depicts overall demand for the auction.
The ten-year benchmark yield dropped by 5 basis points in the secondary market after the auction on July 8. Yield went to 2.22% from 2.27% on the previous day.
A marginal drop in the share of direct bidders along with a slight increase in the share of indirect bidders kept market demand almost flat.
Market demand rose marginally for ten-year T-notes from 70.0% in June to 70.2% in July. The share of indirect bidders rose slightly to 58.1% in July from 57.9% in June. Direct bids fell to 12.1% in July from 12.2% in June.
Bids from primary dealers dropped to 29.8% in July from 30.0% in June. Primary dealers act as market makers for the auctioned securities. They include financial institutions like Credit Suisse (CS).