NEW YORK: US benchmark 10-year Treasury note yields rose to their highest in more than five months on Tuesday, in line with gains in the European bond market, with a strong US equity performance also adding to overall risk appetite.
US 30-year bond yields also rallied, climbing to a three-week peak, while those on two-year notes were near a recent nine-year high.
"Some positive bounce in risk market appears to be the proximate cause," Guy LeBas, chief fixed income strategist, at Janney Montgomery Scott in Philadelphia, said.
Wall Street's Dow Jones index touched a record high on Tuesday. Strong earnings and optimism about US President Donald Trump's tax plans underpinned the Dow and S&P, which closed at all-time highs on all five trading days last week.
US Treasuries also took their cue from European government bond yields, as those on German Bunds hit two-week peaks. Strong business and bank lending surveys backed a growing view that the European Central Bank will announce a reduction of its monthly bond purchases on Thursday.
Thursday's ECB monetary policy meeting has further limited interest in bonds, analysts said.
Meanwhile, the Treasury's US two-year note auction was underwhelming. The note picked up a yield of 1.596 percent, higher than that at the bid deadline. The yield was the highest in nine years, suggesting lukewarm demand.
There were $71.2 billion in bids for a 2.74 bid-to-cover ratio, the lowest since March, and marginally below last month's 2.88. Indirect bidders, which consist mostly of foreign central banks, took 48.2 percent, slightly better than last month's 44.2 percent, but well below the mid-50s level seen in the first half of 2017.
"Not a whole lot of implications for the 5-year, but the result was a bit softer than we expected," said Aaron Kohli, rates strategist, at BMO Capital Markets in New York.
Treasury will sell $34 billion in 5-year notes and $15 billion in 2-year floating rate notes on Wednesday.
In afternoon trading, 10-year US Treasury note prices were down 9/32, yielding 2.408 percent, up from Monday's 2.375 percent. Earlier, 10-year yields rose to 2.414 percent, the highest since mid-May.
US 30-year bond prices fell 21/32, with a yield of 2.923 percent, down from 2.89 percent late on Monday. Thirty-year yields had risen to a three-week high of 2.931 percent.
After the auction, US two-year note yields were at 1.576 percent, up from 1.568 percent the previous session. On Monday, two-year yields hit a nine-year peak of 1.589 percent.
Comments
Comments are closed for this article.