US Treasury debt prices fell on Tuesday, bumping benchmark 10-year yields above 2 percent for the first time in a month as investors positioned for a probable mid-2015 rate hike by the Federal Reserve and big government bond auctions. Ten-year Treasury notes on Tuesday yielded as much as 2.016 percent, a high last seen on January 9, and were last trading at 1.9897 percent, falling 12/32 in price, according to Thomson Reuters data.
Thirty-year bond yields were last trading at 2.5699 percent, reflecting a price decline of 1-2/32, after touching a session high of 2.596 percent. "That's four consecutive down days, and we are still showing some of the hangover from the good nonfarm payrolls report on Friday," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia.
Bonds sank last week, in part because an unexpectedly strong US jobs report on Friday suggested to many investors that the labour market's strength bolsters the case for the Federal Reserve to raise short-term rates sooner than later. Arguments that America's labour market is brightening were reinforced by government data showing US job openings and labour turnover rose to 5.028 million in December from 4.847 million in November, according to interest rate strategist Jim Vogel of FTN Financial in Memphis, Tennessee.
"JOLTS positively reinforced the message of January payrolls," Vogel said in a note. Shorter-term Treasuries, the securities most sensitive to Fed interest-rate shifts, were also off in price on Tuesday, according to Thomson Reuters data. Five-year notes fell 2/32 to yield 1.5021 percent. According to CME Fed Watch, odds on an interest-rate increase in June stand at 70 percent, up from 64 percent in January. The bond market was also making room for this week's $64 billion of Treasury debt auctions, along with sizeable corporate bond deals, such as the $10.75 billion Microsoft Corp priced on Monday. On Tuesday, the Treasury sold $24 billion of three-year notes at a high yield of 1.050 percent, with a bid-to-cover ratio of 3.34. The Treasury is scheduled to auction another $24 billion of 10-years on Wednesday and $16 billion of 30-years on Thursday.
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