Another Record Close in Nasdaq After US Treasury Auction
Today the US stock markets made some modest gains, with the Nasdaq index printing a new record high.

Today the US stock markets made some modest gains, with the Nasdaq index printing a new record high. European stock markets had a bad day today, with all major European indexes closing lower, but US stock ended up higher, with bond yields surging even more after the FED Treasury auction.

Nasdaq closed at record highs again despite a small retreat toward the end, helped by Nvidia gains. The yield on the US 10-year Treasury has increased by 10 basis points today, now standing 22 basis points higher than the post-CPI low and potentially breaking above the mid-March peak of 4.534%.
Nasdaq Chart Daily – On the Way to 19,000
The auction resulted in a high yield of 4.553%, indicating the return investors are willing to accept for holding these notes over their five-year maturity period. The tail, which represents the difference between the highest accepted yield and the average yield of accepted bids, increased by 1.3 basis points, suggesting weaker demand than anticipated.
Direct bids, which reflect domestic demand, were lower than usual for the month, indicating potentially diminished interest from domestic investors. Demand from abroad was also below typical levels, further underscoring the lackluster response to the auction. Despite these developments in the fixed income market, US equity markets are showing mixed performance.
While the NASDAQ index is up by 0.50% or 85 points, indicating strength in technology stocks, the S&P indices are trading back towards unchanged levels. This divergence suggests that investors are reacting differently to developments in the bond market, with some sectors benefiting from higher yields while others are more sensitive to interest rate changes. Additionally, the decline in the Dow Industrial Average by -229 points highlights broader market volatility and uncertainty. This movement in yields is notable for several reasons:
- Two-Year Note Auction: Despite a decent concession just prior to the auction, the two-year note lagged by a whole basis point, indicating a less than enthusiastic demand for shorter-term debt.
- Sales Resumption: Following the two-year auction, further selling resumed, with five-year notes dropping by one basis point, exacerbating the situation.
- US Consumer Confidence: The rise in consumer confidence has heightened concerns about increased demand potentially fueling inflationary pressures, which in turn affects fixed income markets.
Interestingly, while fixed income took a downturn, the dollar and stocks have largely ignored these moves. This divergence could indicate one of two things:
- Complacency: Market participants might be underestimating the impact of rising yields on equities and the broader economy.
- Month-End Flows: It is also possible that these movements are being driven by month-end portfolio adjustments rather than a fundamental shift in market sentiment.
The broader implications of rising yields include potential challenges for equity markets as higher borrowing costs could impact corporate profits and consumer spending. However, the immediate reaction has been muted, suggesting that investors may be waiting for more concrete signals or data before adjusting their positions significantly.
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