US Treasuries prices rose on Tuesday, pushing benchmark yields to six-week lows, as weak stocks enhanced the allure of safe-haven government debt and investors cheered a decent auction of three-year notes. Some measures showed strong demand at the auction but market sentiment took a temporary hit from indications that dealers bid more aggressively than expected to get the bonds at a lower price, based on the yield.
After a brief post-auction setback, Treasuries resumed their rally on the back of Wall Street's weaker tone, which often sends investors scurrying into the safety of government bonds.
"The weakness in the equity market provided a little bullishness to bonds," said Frank Hsu, director of global fixed income at Fimat in New York. "We were not expecting a good auction but it came out all right. So it's kind of a relief." The benchmark 10-year Treasury note was last up 18/32 in price, pushing the yield down to 3.45 percent from 3.52 percent at Monday's close. During the session, the yield fell as far as 3.44 percent, the lowest since May 26, according to Reuters data.
The 30-year long bond also rallied, rising more than a full point in late New York trade. It was last trading up 27/32 on the day, yielding 4.31 percent versus Monday's close of 4.36 percent. The gains in longer-dated bonds were somewhat surprising given that Treasury will auction $19 billion worth of 10-year notes on Wednesday, part of the $73 billion in government bonds hitting the market this week.
On Thursday, the government will sell $11 billion worth of 30-year bonds. Indeed, longer bonds were outperforming shorter maturities, which some said was due to growing worries about the fragile state of the US economy, which remains mired in its worst recession in decades. Underscoring the difficult task of restoring growth, the American Bankers Association said soaring US unemployment and a shrinking economy drove delinquencies on credit-card debt and home equity loans to all-time highs in the first quarter.
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