Bond yields little changed

US Treasuries yields were little changed on Thursday after traders took profits a day after prices rose on views that the Federal Reserve would keep interest rates lower for longer. The release on Wednesday of the minutes from the Fed's September policy meeting showed that some Fed participants wanted to err on the side of patience in keeping policy accommodative. Long-dated and benchmark yields fell to over one-year lows earlier on Thursday before stabilising.
"The guys who were long and bought the market when it was cheap are taking advantage of this rally to sell a little bit," said Richard Gilhooly, an interest rate strategist at TD Securities in New York. He said that traders who had placed short bets against Treasuries on the belief that the Fed would take a more hawkish tone on raising interest rates were sitting on losses and reluctant to place the bets again.
"They were wrong, and they're not going to go straight back in and short the market," Gilhooly said. He said the combination of profit-taking and reluctance to bet against Treasuries again kept yields stable in afternoon trading. The US sold $13 billion in 30-year Treasury bonds to mild demand, marking the last round of $61 billion in new supply this week. Overall bidding for the bonds, as measured by the bid-to-cover ratio, was at 2.40, lower than 2.67 in September.
Analysts said the recent rally in long-dated Treasuries prices resulted in tepid demand. Yields on 30-year Treasury bonds hit 3.029 percent, their lowest level since May 2013, earlier on Thursday. "You're effectively buying at the highs, so it discourages some buyers from buying at the auction," said Jonathan Rick, interest rate derivatives strategist at Credit Agricole in New York.
Benchmark 10-year US Treasury notes were last down 1/32 in price to yield 2.33 percent. The yield hit a low of 2.279 percent earlier in the session, its lowest level since June 2013. US 30-year Treasury bonds were last down 5/32 in price to yield 3.07 percent, from a yield of 3.06 percent late Wednesday. Three-year notes were roughly flat in price to yield 0.91 percent, up from a session low yield of 0.867 percent, which was the lowest since August 19.