Treasury yields climb to one-week high

US Treasury yields rose on Monday after a quiet weekend unmarred by expectations of negative news about North Korea that had pushed risk appetite higher, and a lackluster three-year note auction also pressured bond prices. US long-dated and short-end yields, which move inversely to prices, climbed to one-week peaks. "We opened lower overnight because there's nothing new out of North Korea," said Justin Lederer, Treasury analyst, at Cantor Fitzgerald in New York.
The United States and its allies had braced for another long-range missile launch by North Korea in time for the 69th anniversary of the country's founding on Saturday. The US Treasury's $24 bln three-year note auction was poorly received, as it fetched a yield of 1.433 percent, higher than the expected 1.430 percent at the bid deadline. Bids totaled almost $64.9 billion for a 2.70 cover, the worst since April, well below the 3.13 last month and worse than the 2.83 average.
Indirect bidders, which include major central banks, accepted 46.2 percent, also less than the 64.1 percent previously and the 53.2 percent average. The three-year note attracted little attention despite being sold off going into the auction. Traders tend to sell Treasuries to bump up the yield so they can buy it at a lower price at the auction in a practice known as concession.
"Rates were in a hurry to rise today, but selling has been limited," said Jim Vogel, interest rates strategist at FTN Financial in Memphis, Tennessee. "Although fundamentals haven't changed, the day brings nothing to warrant an immediate purchase of dips. This type of market tomorrow morning will increase risk for US 10-year auction."
Treasury will auction $20 billion in 10-year notes on Tuesday, and $12 billion in 30-year bonds on Wednesday. In late trading, benchmark 10-year Treasury yields rose to 2.123 percent, from 2.061 percent late on Friday. Ten-year yields earlier rose to 2.134 percent, a one-week high. Recent 10-year auctions have seen weaker demand, with the last six showing yields that were higher than expected.
Subadra Rajappa, head of US rates strategy at Societe Generale, said the bank held a slightly negative bias on the upcoming 10-year note auction. She noted that the US 10-year debt had a "rich valuation on an outright basis" as the yield traded below the past nine auction rates. US 30-year bond yields rose to 2.736 percent, up from 2.680 percent the previous session. Thirty-year yields climbed to one-week peaks of 2.752 percent. After the auction, US three-year note yields rose to 1.431 percent from 1.38 percent late on Friday.