The US Treasury's 7-year auction hit a high yield of 4.290% on Thursday, up from the 4.175% high in the previous auction.
The bid to cover ratio for the auction was 2.52, above the 2.51 ratio in the previous auction.
Dealers represented 55.10% of the bids, with direct bidders at 7.31% and indirect bidders at 37.59%.
For takedown, dealers took 10.42%, with direct bidders at 11.19% and indirect bidders at 78.39%.
In accordance with its six-year "sunset" clause, the USMCA trade deal between the United States, Canada and Mexico will be up for review on July 1, said UBS.To be clear, July 1 isn't a hard deadline for a new agreement, but will likely signal the beginning of what could turn out to be protracted trade talks, the bank wrote in a note to clients. The U.S., Canada and Mexico will have to decide what changes should be made to USMCA.Although the U.S. was the driving force behind the abandonment of NAFTA and its replacement with a new free trade agreement (USMCA), it is also now the driver behind the impetus for a larger renegotiation of the existing treaty, stated UBS.This does not mean, however, that Mexico and Canada are without leverage in these negotiations, pointed out the bank. For one thing, Mexico and Canada are now the two largest trading partners of the U.S. This means that there are powerful constituents in the U.S., primarily in the agricultural and manufacturing sectors, that want the treaty to survive.Meanwhile, an outright elimination of a free trade agreement with the U.S., arguably the most importantproductivity-enhancing measure to have transformed Mexico in the past 35 years, risks putting the Mexican economy into a marked downturn. As U.S. financial assistance during the "Tequila" crisis showed, a major economic crisis south of the border is a situation U.S. authorities would almost certainly look to avoid.Canada's sway likely comes from the economic interdependence between the U.S. and Canada, added UBS. Canada is a major supplier of oil, potash, steel, aluminum, critical minerals, and more. Additionally, the integrated supply-chain for the auto sector is another area ofinterdependence, with auto parts crossing the North American border eight times before assembly.Finally, Canada is the top export market for 26 states.Canada's exports to the U.S. are also more heavily skewed to commodities that could be more readily sold elsewhere. Recent remarks by Prime Minister Mark Carney highlight efforts at building out rail and port infrastructure to service European and Asian markets directly.Exemplifying the sense that Canada potentially has leverage in these negotiations, they haven't shied away from progressing with regulations that disproportionately impact U.S. firms, suggesting domestic priorities continue to trump negotiations.Most recently, the Canadian Radio-Television and Telecommunications Commission announced that digital streaming services, which are largely U.S. firms, will be required to contribute 15% of their Canadian revenues to Canadian content.