Treasuries plummet

US Treasuries prices fell sharply on Tuesday as a rally in stocks undermined the safe-haven value of government debt and pushed yields above key levels, further spurring the sell-off. However, investors were reluctant to call Tuesday's slump in bond prices the end of a Treasuries rally that has dominated since early April, despite benchmark yields being pushed back above 3.0 percent.
Wall Street stocks gained over 1.0 percent on Tuesday, helped in part by better-than-expected retail US sales data for May and good Chinese industrial production data.
"The (bond) market was due for a correction, and with stocks able to maintain and build on the early gains you are seeing more longs come out of the (Treasuries) market and push us lower," said Marty Mitchell, chief market technician at Stifel Nicolaus in Baltimore.
Benchmark 10-year Treasury notes fell 29/32 in price, the worst single-day performance since mid-January, with yields rising to 3.10 percent from 2.99 percent late on Monday. The yield briefly traded above 3.10 percent, breaking its 200-day moving average, according to Tradeweb.
Benchmark yields last week dipped to 2.92 percent, the lowest level since early December. Yields have fallen over 50 basis points since early April as evidence has mounted that the US economic recovery is sputtering. But Tuesday's jump in yields may not point to higher rates in the near term, analysts said.
"To the extent that this week's data comes in on the weak side, just as it has over the last several weeks, then you could see the market still gain some ground and rally," Mitchell said.
Thirty-year bonds fell 1-20/32, with their yields rising to 4.30 percent from 4.20 percent on Monday.
From a technical standpoint, Treasuries looked to be setting up for some potential near-term selling, said MacNeil Curry, technical strategist at Bank of America Merrill Lynch in New York. Two-year Treasury notes traded 3/32 lower in price to yield 0.45 percent, up from 0.41 percent late on Monday. Two-year yields were on track for the worst performance since mid-April.
The swaps traded at a cost of around 40 basis points, or $40,000 to insure $10 million in debt, a level where they last traded in mid-to-late May, when fears over the debt ceiling also came to the fore, according to data by Markit. The one-year CDS last closed at such levels in early April 2009, according to Reuters data.