Today was a mixed bag in terms of spreads, even given the price volatility that we’ve seen especially the last week with the Middle East situation. Today’s 7Y auction comments are here, however that took a back seat to late day rumors that a certain individual had been shot in Libya.
Here’s the closing snapshot:
The only spread to widen today was the 2s5, while the most flattening was the belly vs. the long end (5s30). Selected butterfly spreads also saw “elevated” action, mostly dealing with the wings vs. the belly of the curve. The 2s5s30 fly clearly shows this, widening to -88 from -99.30. Also the short end relative to the midcurve was notably wider, 2s5s7 to 81 from 72.5 previously.
Short end yield volatility has been falling since reaching 114 on 2/9/2011 (2Y). Here’s a chart with 10D HV (yields) for the past few years.
(Click on image for full size view)