Treasuries retreat

US Treasury debt prices retreated on Thursday, hurt by a lackluster 30-year Treasury bond auction and some appetite for stocks and commodities after recent selloffs in riskier assets. Benchmark 10-year Treasury notes prices were down half a point in price, their yields rising to 3.23 percent, from 3.16 percent on Wednesday and 3.13 percent last week.
Major stock market indexes rose about 0.5 percent. Front-month US oil futures rose 0.6 percent to finish below $99 per barrel. The Reuters/Jefferies CRB index, a commodity price gauge, rose 0.1 percent. Much of the bond market action on Thursday centred around the US Treasury's $16 billion 30-year bond auction, the last of the government's three refunding auctions this week.
Some price cuts occurred before the bidding deadline as dealers tried to entice buyers, but more cuts came after the deadline when it became evident the earlier price cuts had not been big enough to inspire a more robust bid. "Treasuries traded weaker on the day before the auction, building in a reasonable outright concession," said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut. "The auction was soft, however, with low non-dealer bidding at 41.7 percent versus the 55 percent norm," he said.
The 10-year auction stopped at 4.38 percent, higher than the 4.353 percent when-issued bid at the bidding deadline. The ratio of bids received to those accepted was 2.43, less than the average 2.55 for the last four 30-year bond auctions. Consequently, Treasuries traded lower when the auction results were announced.
The somewhat soft bid for the 30-year bond auction stood in contrast to most recent Treasury auctions, perhaps because yields are now near the lows of their months-long range, said Jim Sarni, managing principal at Los Angeles, California-based Payden & Rygel with approximately $60 billion in fixed income assets. "We're seeing a little retracement," he said.
Even if uncertainty is often the best friend of the safe-haven US Treasury market, Sarni said two scenarios have the potential to push Treasury prices lower and yields higher. "Though growth and inflation might not be as strong as once thought, the worst of the downturn is clearly behind us," he said. That limits any rationale for pushing bond prices higher and yields lower than where they are now, he said. The Treasury's 30-year bond sale on Thursday concluded the government's $72 billion May refunding. The Treasury sold $32 billion of three-year notes on Tuesday and $24 billion of 10-year notes on Wednesday.