DURATION HOLDS. FRONT END WELL BID. 2Y CLEARS CLEAN. 5Y IS THE REAL TEST.
Tape (Wednesday May 27, 9:05 AM EDT)
30Y 5.01% (-1bp). 10Y 4.48% (-1bp). 5Y 4.17% (-2bp). 2Y 4.05% (-2bp). Parallel rally continuing.
WTI $93.89 (+3.2%). Brent $99.58 (+2.4%). Oil bouncing modestly off Tuesday's low — post-binary chop, not regime shift.
Gold $4,432 (-1.6%). Silver $74.54 (-3.1%). Inflation expectations continue deflating.
EUR 1.1647 (-0.1%). USDJPY 159.41. Dollar firming as cleanest-sovereign trade extends.
Credit OAS unchanged. IG 1-3Y at 50bp, 5-7Y at 75bp. Spreads holding the line — no risk-off bleed.
Yesterday's $69B 2-Year Auction
Cleared at 4.071% with bid-to-cover 2.68x — above recent average.
Primary dealer takedown 12.3% — strong (recent stressed auctions had dealers at 25%).
Direct bidders 30.1% — unusually high. Domestic institutional buy-side stepped up at the new clearing levels.
Indirect bidders 57.6% — soft. Foreign demand did not return at compressed post-Hormuz yields.
Read: Domestic institutional demand absorbed front-end supply while indirect participation stayed soft. That keeps the BofA foreign-demand weakness thesis in play. The 5Y and 7Y this week matter more for whether this is structural or auction-specific.
Calendar
1:00 PM: $70B 5-year Treasury auction. The real duration test.
Fed speakers throughout day.
Color
This is not a full post-binary unwind. Tuesday's 2Y auction cleared cleanly, but the composition matters more than the stop: domestic demand stepped up while indirect participation stayed soft. The credit spread non-widening is the stabilizer — the market is digesting geopolitical volatility without forcing an IG risk-premium repricing.
Gauge holds at 6. Duration component holds at 7 — today's tape extends Tuesday's rally rather than reversing it. Supply stays at 8 — foreign demand is the open question, not resolved. Basis/credit stays at 6.
Watch
1:00 PM 5Y auction. If indirects come in below 60%, the foreign-demand concern gets harder to dismiss, and Thursday's 7Y becomes the cleaner duration-risk test.
— Rich Petruzzo, CFA
Full Sunday read: https://www.linkedin.com/pulse/dispatch-vol-1-183b-supply-pce-friday-hormuz-tape-rich-petruzzo-cfa-rmbqe
Rich Petruzzo is a CFA charterholder. CFA® is a registered trademark of CFA Institute. The Dispatch is not affiliated with or endorsed by CFA Institute. Content for informational purposes only; not investment advice.