NEW YORK: The US government saw strong demand for its $24 billion auction of three-year notes on Tuesday, the first sale of $62 billion in coupon-bearing debt supply this week.
The debt sold at high yields that were almost two basis points below where the notes had traded before the auction. The ratio of bids to the amount of three-year debt offered was 2.93, up from 2.72 at the prior three-year note sale in April.
Treasuries held firm in the secondary market after the auction, a show of strength considering the sale came amid heavy corporate bond issuance and as risk assets including stocks and oil rallied.
"The market is taking down all the supply right now," said Tom Tucci, head of Treasuries trading at CIBC in New York.
Strength in German and other sovereign bonds helped to support Treasuries on Tuesday, while the higher yields of US bonds relative to comparable debt also boosted demand.
"The US market is so cheap on a relative basis to all these other G7 markets, you're going to have natural buyers," Tucci said.
Benchmark 10-year notes rose 1/32 in price to yield 1.76 percent, little changed from Monday. Comparable German government bonds, by comparison, yield 0.12 percent.
The US yields have fallen from 1.94 percent on April 26, but are higher than the one-month low of 1.71 percent set on Friday in the wake of the disappointing US jobs report for April.
Government and corporate debt supply is in focus with no major economic releases due until Friday's US retail sales report for April.
"It's really supply on tap, and we're following other major markets," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.
The US government will also sell $23 billion in 10-year notes on Wednesday and $15 billion in 30-year bonds on Thursday.
US bond yields have fallen this month as investors evaluate when the Federal Reserve is likely to next raise interest rates. Weaker-than-expected job gains in April reduced expectations that the US central bank will lift rates at its June meeting.
US bond prices currently indicate that investors do not expect an interest rate increase until July 2017.
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