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US bonds fall in Europe before 10-year debt sale

us-treasury-noteLONDON: US government bonds fell in Europe on Wednesday as investors made room in their books for upcoming supply of a combined $34 billion of 10- and 30-year paper.


The Treasury will sell $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday. A German auction of five-year bonds was also contributing to broad pressure on safe-haven debt.


A sale of $32 billion of three-year notes on Tuesday saw strong non-dealer bidding. The high yield was 0.385 percent, in line with expectations.


Benchmark 10-year T-note yields were 1.9 basis points higher on the day at 1.8833 percent, while 30-year yields rose 2.1 bps to 3.0863 percent.


"With supply coming on the horizon in both Treasuries and Germany, it seems like the market is cheapening up here," said Craig Collins, a trader at Bank of Montreal, adding the next move in yields depends on how supply is absorbed.


"The 10-year note is in an OK shape ... but the long bond tomorrow is more of a wild card, a little tougher to digest in this environment. If it goes poorly tomorrow I think 2 percent (in 10-year) yields becomes a legitimate target," Collins said


T-note yields hit 8-month highs of 1.9750 percent last week on the back of a last-minute deal to avert a fiscal crisis in the US and some better-than-expected economic data out of the world's top economy. The US market stabilised this week as some investors snapped up the cheapened paper.

Copyright Reuters, 2013


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