NEW YORK: Treasury yields fell on Wednesday after the US government saw strong demand for its $23 billion auction of 10-year notes, the second sale of $62 billion in new coupon-bearing debt this week.
The Treasury sold the notes at a high yield of 1.71 percent, which was 2 basis points below where the debt had traded before the auction.
Indirect bidders, which can include governments, fund managers and insurance companies, bought 73.5 percent of the sale, the largest portion since data began being released in 2003.
“It went tremendously. It was the biggest indirect bid on record, and the dealers ended up with one of the smallest amounts on record,” said Lou Brien, a market strategist at DRW Trading in Chicago.
Demand for Treasuries this week has been robust even amid heavy supply of corporate debt.
The government also saw strong demand for a $24 billion auction of three-year notes on Tuesday. The US will sell $15 billion in 30-year bonds on Thursday.
Benchmark 10-year notes ended up 7/32 in price on the day to yield 1.74 percent, down from 1.76 percent on Tuesday.
The yields have fallen from 1.94 percent on April 26, but are above the one-month low of 1.71 percent set on Friday following the disappointing US jobs report for April.
US bond yields have fallen on concerns about slow global economic growth and tepid inflation.
Investors have also lowered expectations the Federal Reserve will raise interest rates at its June meeting.
“You have to be really hard-pressed to believe the Fed is going in June, it’s looking more like September,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.
No new major economic releases are due until Friday’s retail sales report for April.
Concerns about possible repercussions if Britain chooses to
leave the European Union at its June referendum may be adding demand for safe haven US bonds.
“It could be an extremely disruptive event if it occurs, even if it’s a low probability,” said Brien.
Strength in European sovereign bonds has also supported US bonds. Treasuries are considered attractive as they pay far higher yields than comparable European and Japanese debt.
German 10-year notes have rallied from 0.31 percent on April 27 to yield only 0.13 percent.
Copyright Reuters, 2016
Courtesy : BRecorder