Holding Overnight Gains Ahead of Week’s Final Auction

Bond markets were slightly weaker during Asian hours, but got their groove back during the European session. This wasn’t so much a factor of economic data (which was generally in line with expectations in Europe) as it was about volatility related corporate bond issuance. Lately, that’s been a net-negative for bond markets as firms frequently sell Treasuries (directly or indirectly via swap contracts) to “lock” their borrowing costs between the time their bond offering is announced and when the bonds are actually issued. But the volatility goes both ways because the firms can exit those hedges by effectively buying back the previously sold Treasuries.

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