LONDON: US Treasuries eased on Tuesday ahead of a three-year bond sale, which will kick off $72 billion of refunding auctions this week and as talk of a bailout package for Greece settled investor nerves after a ratings downgrade.
US Treasury prices were broadly lower, in tandem with euro zone government bonds, after a report of a new bailout package for Greece slowed safe-haven flows prompted by a downgrade to Greece's credit ratings in the previous session.
10-year yields rose 1.5 basis points to 3.17 percent, slightly off their lowest since December at 3.13 percent hit on Friday. Yields on five-year paper rose to 1.87 percent and yields on 30-year paper traded higher at 4.32 percent.
‘We had a large drop yesterday in Treasury yields after the Greek downgrade and that has petered out a little,’ Philip Marey, US strategist at Rabobank, said.
Standard & Poor's on Monday cut Greece's credit rating further into junk territory, exacerbating worries over how weak euro zone economies are going to climb out of debt, underpinning appetite for bonds.
But investors sold fixed-income assets on Tuesday after Dow Jones reported that Greece was expecting a new aid package of nearly 60 billion euros ($85.71 billion) to deal with its debt crisis, even though the report was later denied.
Investors were also bracing for a $32 billion sale of three-year notes later on Tuesday, followed by $24 billion of 10-year paper on Wednesday and $16 billion of 30-year bonds on Thursday.
‘We are getting supply coming into this market ... the market is building concessions going into this,’ one trader said.
Elsewhere in the bond market, IFR, a Thomson Reuters news and market analysis service, estimates that about $20-25 billion of corporate bonds will be sold this week and about $85-100 billion overall this month, a typically busy one as companies look to lock up funding needs before the quieter summer months.
The T-note future eased 8/32 on the day to 122-06/32 although Societe Generale said in a research note that the short-term risk was to the upside.