Daily Market Color April 12, 2021Treasury Auctions Stable as Equities Drop from Record Highs Investors quietly await earnings season The U.S. Treasury auctions in 3yr and 10yr debt showed investors still have an appetite for government debt, which led yields to increase only slightly on a flattening curve. The 10yr closed 2bps higher on the day to 1.67%. All three major equity indices closed down from their records highs with the Nasdaq dropping 0.20%, its worst daily decrease in nearly two weeks, as investors await inflation data and the start of first-quarter corporate earnings later this week. Pricing pressures building across goods and materials The Labor Department’s producer price index report released on Friday showed the highest increase in intermediate demand since 1974. Intermediate goods and materials include fuel, plastics, and steel that are used to make final demand products. These costs increased 4% in March and 12.5% year over year. U.S. Treasuries are still in demand A much anticipated U.S. Treasury auction in 3yr and 10yr debt came without a bang to rates. Both auctions showed there is still solid demand by investors for U.S. government debt. The demand for $58 billion of 3yr notes had a bid-to-cover a ratio of 2.32, while $38 billion in 10yr notes had a bid-to-cover of 2.36. Tomorrow, the U.S. Treasury will auction an additional $24 billion in 30yr debt.
