Long-dated US Treasuries made the slightest of gains on Wednesday, making a leaden bounce from sharp losses earlier this week, aided by weaker-than-expected new home sales and consumer spending. Data showed new home sales fell in November. The news sent bond prices to session highs but the impact was short-lived. New homes are just a small part of the total housing market, economists explained.
In late trade, Treasuries had erased nearly all gains. Short- and medium-term securities posted narrow losses, letting the yield curve flatten a bit from a historically steep slope. The difference between two- and 10-year Treasury yields stood at 282 basis points at 3 pm on Wednesday, down from an historic high of 287 bps on Tuesday.
Position squaring before the long Christmas holiday weekend was a feature of generally moribund, low volume trading. "The market needs CPR; it's dying on the vine here on the eve of Christmas Eve," said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida. "You could almost argue it's shutting down for the year."
News the market absorbed included a 0.5 percent November rise in personal spending, an 11.3 percent drop in sales of newly built US single-family homes to the lowest level in seven months in November, and a smaller-than-expected rise in December consumer sentiment. The prospect of supply might have added some weight to the middle part of the curve.
The Treasury said on Wednesday it would sell a total of $118 billion of two-year, five-year and seven-year notes next week. The amount matched the size of similar sales in November and was in line with analysts' expectations. The latest count of weekly jobless claims, forecast at 470,000 for the week ended December 19, down from 480,000 a week earlier, will get attention because investors are trying to figure out when the economy will begin producing more jobs than it is shedding.
Benchmark 10-year Treasury notes were trading 1/32 higher in price to yield 3.76 percent, while two-year notes were down 1/32, their yields rising to 0..94 percent from 0.92 percent. Benchmark 10-year notes were on track for the worst week in four and the spread between two-year and 10-year note yields remained near the record-wide level reached on Tuesday after investors bet recent strong data bode well for any economic recovery.