Yields rise as US stocks rebound

NEW YORK: US Treasury debt yields rose on Thursday, reversing their earlier fall in a generally thin market, bolstered by gains in the stock market as investors awaited a crucial Federal Reserve meeting next week.

Investors sold Treasuries pretty much across the board, pushing yields higher. Analysts said selling was notable in the so-called "belly of the curve," or the U.S. 5-7-year notes.

"The belly is selling off and that's a function of risk assets finding a bid, but big picture, it's still just noise ahead of the Fed meeting next week," said Ian Lyngen, senior government bond strategist, at CRT Capital in Stamford, Connecticut.

Oil remained lower on Thursday and for the first time this week, that did not seem to matter, as Treasury investors looked to other factors such as the rally in stocks.

In late trading, U.S. 10-year notes fell 7/32 in price to yield 2.235 percent, up from Wednesday's 2.224 percent. Yields on the 10-year hit the day's low of 2.206 percent earlier after U.S. jobless claims increased to 282,000 for the week ended Dec. 5.

U.S. five-year notes fell 7/32 in price to yield 1.679 percent, up from 1.655 percent late on Wednesday. U.S. 7-year notes dropped 9/32 in price, yielding 2.024 percent, up from Wednesday's 2.000 percent.

The 30-year bond, on the other hand, was down 3/32 in price to yield 2.966 percent, down from 2.977 percent on Wednesday.

A solid U.S. 30-year bond auction went reasonably well, but had little impact on the market, analysts said. The high yield on the bond came in at 2.978 percent, down from 3.07 percent in November.

The auction details, however, showed strong investor interest.

Indirect bidders, mainly foreign central banks, took 63.9 percent, one of the highest on record, versus the prior 60.3 percent, and the 53.6 percent average. There were almost $31.5 billion in bids for a 2.42 cover, on par with 2.41 last month.

Nomura Securities said the healthy demand for long-dated paper is being underpinned by rising expectations for "a dovish hike" and a "possible flattening positioning into next week."

In recent months, there has been a flattening of the yield curve, higher rates on the front-end than on the back-end, which essentially reflects expectations of a Fed tightening.

Traders tend to sell the short end since it is the most vulnerable to a Fed hike, while they buy the long end, which benefits from lower inflation once the Fed raises rates.