We saw a similar dip in the US dollar yesterday around this time.
That adds to our suspicion that this drop is flow-related either around spreads, position squaring or something else.
The Treasury's refunding announcement included smaller auction coupons but BMO contends that's not a surprise:
"The refunding announcement confirmed the widely expected coupon cuts from the Treasury Department with the auction of $45 bn 3s, $36 bn 10s, and $22 bn 30s next week. Over the course of the quarter 2s, 3s and 5s will come down by $1 bn/month, while 7s will continue to decline at $2 bn/month. Along with the $1 bn reduction in 10s and 30s, 20s will be cut by $2 bn and May's refunding in the sector will be $17 bn. Not particularly surprising new information, nor was the confirmation that 10-year TIPS will also be bumped by $1 bn. In the front-end the 17-week CMB that has been issued regularly will transition to a benchmark 4-month bill."
Yesterday's selling in the US dollar didn't last. Today, we will have to wait until after the FOMC to get any definitive moves.
