US Treasury prices fell on Tuesday after a long-awaited bailout deal for Greece dented appetite for safe-haven assets, but losses were moderated by concerns over Athens' implementation of stringent austerity measures. The 30-year Treasury yield reached a technically significant level in upward trend, putting strategists on watch for a definitive break to higher yields in the long end of the Treasury curve in the coming days.
"Treasuries have been caught in the crossfire between new money trying to put on longs and people selling on the Greece news," said Gennadiy Goldberg, interest-rate strategist at 4Cast, Inc in New York. Goldberg said a yield of 3.19 percent on the 30-year bond represented a 23.6 percent retracement of the weekly measurement of the 30-year bond's rally from March 2011 to October 2011.
Prices were also undermined as the Treasury Department began selling $99 billion of US Treasuries this week, beginning with $35 billion of two-year notes on Tuesday afternoon. Investors often push to cheapen Treasuries going into such sales. The Treasury's two-year note auction on Tuesday drew a high yield of 0.31 percent, the highest yield since July 2011. The sell-off in Treasuries deepened slightly afterward.
Two-year Treasury note yields also hit 0.31 percent in the open market, marking the highest since late October. The Treasury will auction $35 billion in five-year notes on Wednesday and $29 billion in seven-year notes on Thursday. Bonds dipped after euro zone ministers reached agreement on measures to cut Greece's debt to just above 120 percent of economic output by 2020, signing off on the country's second rescue in less than two years and allowing it to meet a bond repayment next month.
Benchmark 10-year notes were trading 13/32 lower in price to yield 2.05 percent, up from 2 percent late Friday, while 30-year bonds were 24/32 lower to yield 3.19 percent from 3.15 percent. Shorter-dated Treasuries could come under more pressure this week. In addition to the Treasury's sale of $99 billion in new notes, the Federal Reserve will twice enter the market this week to sell shorter-dated notes.