Bonds Defy Odds: $42B Auction Sparks Bullish Wave

Bond market analysts anticipate a potential tail in today's $42 billion 10-year auction due to rich valuations and historical trends, but this is unlikely to shift the overall bullish sentiment towards bonds.
The when-issued 10-year yield stands at 4.472%, over 20bps lower than the beginning of the month, indicating strong demand for bonds. However, recent history shows that 10-year auctions have struggled, with less than 20% stopping through in the last two years.
Despite potential risks linked to CPI data, investors are expected to overlook any auction tail, given the favorable supply outlook, steady coupon auction sizes, and ongoing Fed tapering. Weak economic data may also support bond prices, presenting a potential buying opportunity for investors.