Treasuries tumble

10 Sep, 2009

US Treasuries prices fell on Tuesday as stocks gained, undermining the safe-haven demand for government debt. Losses were more pronounced on the longer end of the Treasury curve as investors moved to cheapen securities ahead of the auctions of 10-year notes and 30-year bonds later this week.
Benchmark 10-year Treasury notes traded 11/32 lower in price to yield 3.48 percent, the highest in over a week and up from 3.44 percent late Friday. Thirty-year bonds traded 25/32 lower to yield 4.31 percent from 4.27 percent.
Treasuries briefly stepped into positive territory on Tuesday afternoon following relatively solid demand in an auction of $38 billion of three-year notes. The sale will be followed by the auction of reopened issues of 10- and 30-year securities on Wednesday and Thursday, respectively. The high yield in the three-year note auction came in just below the yield in when-issued trade, indicating good demand for the notes.
Stocks rose early in the day on the view that the economy is strengthening, but safe-haven Treasuries have generally held firm, bolstered by the notion that the economic recovery will generate only modest job growth, cautious consumer spending, and minimal inflation. Supporting that view, stock prices are up, but remain well below last year's peaks, Moran said.
The heavy auction calendar contrasts with a light calendar of economic data, said William O'Donnell, head of US Treasury strategy at RBS Securities in Greenwich, Connecticut. The Federal Reserve on Tuesday bought $4.950 billion in Treasury coupons with maturity dates ranging from May, 2016 to November, 2017. Two-year notes traded unchanged in price to yield 0.94 percent, while five-year notes were down 4/32 to yield 2.39 percent from 2.36 percent late Friday.

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