US Treasury yields rose on Tuesday as expectations of new stimulus in Japan boosted stocks and reduced demand for safe haven bonds, and after the Treasury Department saw the weakest demand for 10-year notes at an auction in seven years. Japanese Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending as evidence mounted Japan's corporate sector is floundering due to weak demand, but did not give details on the size of the package.
The prospect of more spending boosted risk appetite globally and helped propel US stocks to record highs. Rising yields were still not enough to entice many buyers to a $20 billion sale of new 10-year notes, which saw the lowest bid-to-cover ratio since March 2009. Benchmark 10-year notes ended down 24/32 in price to yield 1.513 percent, up from 1.434 percent late on Monday.
The notes hit record low yields of 1.321 percent last Wednesday on concerns about slowing global growth, which were accelerated by Britain's vote to leave the European Union. Buyers were also unenthusiastic for a $24 billion sale of three-year notes on Monday, which saw the weakest demand since July 2009. The US Treasury will auction $12 billion in 30-year bonds on Wednesday, the final sale of $56 billion in new coupon-bearing supply this week.
Thirty-year bonds have outperformed recently as investors reach for longer duration to generate yield as interest rates globally plunge and turn negative in countries from Germany to Japan. Thirty-year bonds traded at record low yields of 2.089 percent overnight on Monday, before backing up to 2.233 percent on Tuesday.
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