US Treasury yields held steady on Tuesday as solid investor demand for $24 billion of three-year government notes offset mild selling in bonds after Wall Street stock prices pared early losses. Bond yields have held in a tight range following last Friday's jobs data that showed the US labour market continued to tighten and a tentative pickup in wage growth.
"It's a market that's trying to sell off but it's not succeeding," said Aaron Kohli, interest rate strategist at BMO Capital Markets in New York. The yield on benchmark 10-year Treasuries was little changed at 2.381 percent as it bounced in a narrow 3 basis-point range. Two-year yields were flat at 1.194 percent, while 30-year yields nudged up 0.4 basis point to 2.972 percent.
The US Treasury Department sold the latest three-year debt issue, part of this week's $56 billion in longer-dated Treasury supply, at a yield of 1.472 percent, the highest since April 2010. Indirect bidders including fund managers and foreign central banks bought 54.6 percent of the three-year supply, their biggest share since September. "The strength of the indirect bid typically tends to trade the strength of investment fund demand," John Canavan, market strategist at Stone & McCarthy Research Associates, wrote in a research note on the three-year auction.
The Treasury will sell $20 billion in 10-year notes on Wednesday and $12 billion in 30-year bonds on Thursday. Investors' enthusiasm in Treasuries, which have retraced some of its heavy losses in late 2016, was tempered by data on Monday that showed US small business optimism hit a 12-year high in December and a pickup in job openings. Possibility of steep tax cuts and infrastructure spending under a Trump administration and a Republican-controlled Congress has stoked worries about a surge in inflation and federal borrowing, investors said.
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