US Treasury debt prices gained on Thursday as losses in the euro and struggling stocks enhanced the allure of safe-haven government bonds. Price gains were limited, however, by some minor disappointment over the results of an auction of $16 billion of 30-year bonds.
The yield investors demanded at the sale was higher than the yield at which 30-year bonds were trading in the open market, a phenomenon known as a "tail," indicating investors pushed aggressively to undermine the price of the long-dated debt. "The auction tailed a little bit, although it was not a horrible auction," said Mary Ann Hurley, vice president of fixed income trading at D.A. Davidson & Co in Seattle.
Benchmark 10-year notes traded with a yield of 3.54 percent, down slightly from a high yield of 3.55 percent in an auction of $24 billion of the notes on Wednesday. The eurozone's debt debacle has been a boon for safe-haven bonds recently, continuing to fray investor nerves despite a $1 trillion rescue plan worked out over the weekend and tough budget talk from Portugal and Spain.
Some analysts worry the new European austerity will weaken a global economy still struggling to regain its strength. Others remain skeptical that the crisis package will work when push comes to shove. Treasury yields have retraced to near levels prior to last Thursday's massive safe-haven rally. The tight focus on foreign exchange is new for the Treasury market and is a result of the eurozone crisis. The 30-year bond sale on Thursday was the third and final of this week's total of $78 billion of supply of government coupon-bearing securities.
Sales of three-year notes on Tuesday and 10-year notes on Wednesday were both met with relatively solid demand. Despite the higher-than-expected yield in the 30-year auction, the sale was not taken as a complete failure, which limited Treasuries' losses. Thirty-year bonds traded 28/32 higher in price to yield 4.43 percent, down from 4.48 percent late on Wednesday, while two-year notes traded 2/32 higher in price to yield 0.84 percent from 0.87 percent.
Comments
Comments are closed.