NEW YORK: US Treasury yields rose on Wednesday as dealers sold government bonds to hedge Saudi Arabia's first-ever global bond issue of $17.5 billion.
Saudi's multi-part debt offering drew heavy investor demand as the world's top oil exporter sought to borrow at historic low yields.
Bond dealers typically sell Treasuries to hedge against an issue they underwrite and then buy them back after it is sold.
"It's a huge deal. There's some rate-lock selling," said Mary Ann Hurley, vice president of fixed income with D.A. Davidson in Seattle. "As the Saudi deal gets put away, you could see some reversal of that rate-lock selling."
Benchmark US 10-year Treasury notes were last down 1/32 in price for a yield of 1.754 percent, up 0.6 basis point from late on Tuesday. The 10-year yield remained below a four-month peak of 1.841 percent reached on Monday.
The rise in yields was also spurred by data that showed domestic single-family home construction rising 8 percent to its strongest level in seven months in September, which revived some optimism about the housing sector.
The jump in single-family housing activity helped to offset a 38 percent plunge in apartment construction that knocked overall groundbreaking last month to its weakest level in 1-1/2 years.
Meanwhile, investors are awaiting possible clues on the European Central Bank's thinking on its 1 trillion-plus euro bond purchase program which may conclude as early as March 2017.
Traders have been speculating whether the ECB, which will hold a policy meeting on Thursday, would consider paring its quantitative easing as Europe continues to struggle with weak growth and faces Britain's exit from the European Union.
"The market has come to realize central banks have pretty much done all they can to help markets," Hurley said. "Still the ECB will maintain its accommodative stance."
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