Daily Market Color November 20, 2023Treasury Auction Calms Fears of Supply-Demand Imbalance Long-term rates fall after Treasury auction. Swap rates and Treasury yields were mixed after a 20-year Treasury auction garnered high demand, which eased concerns of over-supply. 20 and 30-year UST yields dropped as many as ~10bps from their intraday highs, a net 2bp decline on the session. Meanwhile, big tech rallied after the weekend’s OpenAI saga, as Microsoft and Nvidia climbed to all-time highs while the NASDAQ Composite rose 1.13%. A sigh of relief: long-dated Treasury auction well received. In a reversal from the 30-year Treasury auction earlier this month that sent rates 10+bps higher, today’s $16B 20-year auction saw high demand and lower yields. Recent economic trends, including dovish commentary from Chair Powell on FOMC day and slowing inflation, boosted demand for duration. As a result, indirect bidders took down 74% of the issuance, the highest since June. Fed’s Barkin argues that inflation will be sticky. Richmond Fed CEO Thomas Barkin suggested that the market’s projected 2024 rate cuts are premature since he expects inflation to remain stubbornly elevated. Barkin also noted that recent economic data has been positive, citing continued economic growth, unemployment at 3.9%, and “settling” but still elevated inflation.
