US Treasuries eased on Tuesday as investors pushed for price concessions in this week's auctions of $66 billion of debt, with some expectations of further losses on Wednesday going into the sale of 10-year notes. Bonds were also undermined on Tuesday by a rise in stocks and a dip in oil prices.
Investors were happy to step up and buy in the Treasury's sale of $32 billion in three-year notes, the first sale of the week, which will also include a reopening of 10-year notes and 30-year bonds. "The shorter end benefits because the Fed is buying and there's safety demand due to events around the world," said Jim Sarni, managing principal at Payden & Rygel, with more than $50 billion in fixed-income assets.
"First, geopolitical risks are driving people to safety, and second, the risk that rates will rise as the economy continues to rebound drives people to look for opportunities on the shorter end of the curve," Sarni said. At least one analyst was looking for Treasury yields to move higher going into the reopened 10-year sale on Wednesday afternoon.
"For the benefit of a data-impaired Wednesday we'll err on the short-term bearish technicals to provide a concession for the 10-year auction," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.
US government debt yields are currently in the middle of a five-week range. Economic data has taken a back seat to a safe-haven bid as unrest in the Middle East and North Africa continues and investors worry about the effect rising oil prices will have on the global economy. Benchmark 10-year notes last traded down 8/32 in price to yield 3.55 percent, up from 3.52 percent late Monday, while 30-year bonds fell 19/32 in price to yield 4.66 percent, up from 4.63 percent.