Economist's Insights

Today’s Trading Activity – Treasurys Rally on Equity Weakness, Strong 30-Year Auction

Oct 12, 2017

The major U.S. equity indices faltered between 0.1% and 0.2% Thursday as Treasury yields closed near their lows of the day and the Dollar rose for the first time in the last five days. The telecom sector was the biggest drag on the S&P, losing more than 3.5%. The sector’s loss was driven primarily by a more-than-6% decline in shares of AT&T. The telecom giant reported a sharp loss in the number of TV subscribers as the industry continues to fight off less expensive options that continue to drive customers to cut the cord. The second worst performing sector was financials after JPMorgan and Citi reported better-than-expected earnings but showed signs of headwinds from depressed trading revenue and increased consumer credit concerns. Citi led the sector’s losses with a 3.4% drop. Treasury yields remained lower during the entire Thursday session and made a notable move down after an auction of 30-year notes received the strongest bid-to-cover since September 2015 and the smallest primary dealer award since March. The 2-year note fell 0.6 bps to 1.51%, the 5-year yield fell 1.8 bps to 1.94%, the 10-year yield dropped 3.0 bps to 2.32%, and the 30-year yield shed 3.6 bps to 2.85%. The outperformance by the Long Bond pushed the spread between 5s and 30s to its lowest level since November 2007.