The iShares 3-7 Year Treasury Bond ETF (IEI), which tracks the performance of US Treasury bonds with maturities between three and seven years, is trading at $117.94 as of 12:38 on October 8, reflecting a slight increase from its last close of $117.85. This movement comes amid a backdrop of rising yields in the Treasury market, with the new $58 billion 3-year Treasury auction poised for a small tail despite attractive yields. The when-issued 3-year yield stands at 3.873%, up significantly from the 3.44% awarded in the prior month, marking the largest inter-auction rise in over a year.
The flattening yield curve, following a robust jobs report, adds to the relative value appeal of 3-year bonds, potentially benefiting ETFs like IEI that are sensitive to interest rate changes. However, seasonal weakness in October and inflation concerns may temper demand, as historically, 57% of October auctions have tailed. Despite these challenges, the strong participation by indirect bidders in previous auctions suggests continued institutional interest, which could support IEI's price stability in the face of macroeconomic uncertainties.