US government debt prices remained at slightly lower levels on Monday following a $44 billion auction of two-year notes. The market for Treasuries was thin, with many regular participants absent during the second of two holiday-shortened weeks to end the year.
Following the two-year auction, which analysts said drew a modest response given the time of year, prices hewed mostly to earlier levels, with longer-dated notes registering moderate losses. The two-year auction, the first of three scheduled for this week, drew a higher percentage of direct bidders compared with previous two-year auctions, but a smaller percentage of indirect bidders.
"We knew the street's balance sheets were going to be light coming into year-end so there might be some hesitation in bidding aggressively at the auctions, but we didn't really see that," said Ian Lyngen, a senior government bond strategist at CRT Capital Group in Stamford, Connecticut. "The market ground sideways here into the close."
Benchmark 10-year Treasury notes traded 8/32 lower in price to yield 3.84 percent, the highest in nearly five months, up from 3.81 percent late on Thursday. The two-year note was trading 4/32 lower in price to yield 1.04 percent, up from 0.97 percent late on Thursday.
The two-year auction was the first of three scheduled for this week, amounting to $118 billion in new supply. The Treasury will auction $42 billion of five-year notes on Tuesday and $32 billion of seven-year notes on Wednesday. Five-year notes were trading 8/32 lower in price to yield 2.59 percent, up from 2.54 percent late on Thursday, while the 30-year bond was 7/32 lower to yield 4.69 percent, up from 4.68 percent.
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