LONDON: US government debt prices fell on Monday as bondholders made room for this week's supply, further underperforming German bonds as the economic outlook in theUnited Stateslooked stronger than in the euro zone.
The US Treasury plans to sell $35 billion of two-year notes on Tuesday, $35 billion of five-year notes on Wednesday and $29 billion of seven-year notes on Thursday.
US 10-year T-note yields were 2.5 basis points higher at 2.2586 percent. T-note futures were 13/64 lower at 128-27/32, with the market also positioning for firm readings of the National Activity Index, building permits data and pending home sales later in the day.
"We're building a concession ahead of (supply) and we have consumer confidence figures which should show theUSeconomy is in a pretty healthy position at this juncture," RIA Capital Markets bond strategist Nick Stamenkovic said.
US Treasury yields have risen sharply this month after upbeat economic data took bets for further monetary easing off the table. Stamenkovic expected them to establish a new trading range around 2.1-2.4 percent, after trading within a 1.8-2.1 percent range for much of this year.
In contrast, data out of the euro zone has been disappointing, and German Bunds have also been supported by safe-haven inflows fueled by worries overSpain's fiscal performance.
The US/German 10-year yield spread was last 2 basis points wider at 38 bps, having hit its widest levels in more than a year at just over 39 bps in the Asian session.
"More troubles for the euro periphery will continue to drive Bund yields lower, and UST-Bunds wider, for a while yet," Societe Generale strategists said in a note. "In addition, safe haven demand for (US Treasuries) is zilch at present."
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