Bonds Pare Gains

U.S. Treasury prices trimmed gains, grinding off the highs set around midday Tuesday as stocks found a bottom and the safety-bid petered out. The market has to digest a double barreled batch of Treasury supply Wednesday due to the holiday-shortened week. Tuesday’s short-dated bills saw largely sub-par results. Treasuries fluctuated on the news Catalonia’s declaration of independence would be put on hold, while the German Bund saw a brief rally.

The 30-year yield recently traded tightly around the 2.88% point against a 2.85% low, 2.9098% overnight high and 2.905% close Friday. The 10-year yield stalled near 2.34% from a 2.3155 low, 2.3726% high and 2.368% close. The five-year yield was stuck near 1.945% versus a 1.9213% low, 1.971% high and 1.968% Friday. The two-year yield was little-changed, hugging the 1.51% point after a midday 1.484% low, 1.5285% high and close near 1.512%.

Traders are looking to Wednesday’s Treasury auctions of $24 billion new three- and $20 billion reopened 10-year notes with $12 billion reopened 30-years on tap Thursday. The week’s data will be scrutinized for signs of inflation. The final September producer price index (PPI) is due Thursday and is expected to come in at a hotter 0.4%, the biggest jump since November. Friday’s September retail sales are expected to see a significant hurricane-driven boost, up 1.8%, which would mark the highest since 2010.

New issues are expected to pick-up following bank’s earnings reports. Tuesday included the European Investment Bank’s $3 billion five-year sale. The massive Northrop Grumman offering on Tuesday had $1.0 billion three-year notes, $1.5 billion each of five and sevens along with $2.0 billion 10s and $2.25 30-year bonds. Broadcom had a $750 million threes, $1.0 billion each in five- and sevens as well as $1.25 billion 10-years. Phillips 66 Partners had 2018 and 2045 maturities slated, and Conagra Brands had $500 million three-year floating-rate notes.

The $20 billion 52-week bill sale results were about average, awarded at the when-issued 1.365% while demand saw bidders put-up $3.27 for each $1 on offer right on the $3.26 average. Indirect bidders, the proxy for official foreign interest, took just 35.0% versus 37.0% previously and the 40.3% average.

Dallas Federal Reserve President Robert Kaplan has an economic Q&A at 8 p.m. ET.

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