NEW YORK: The US Treasuries market rallied on Thursday with benchmark yields retreating from seven-month highs as lower European borrowing costs and a strong 30-year bond sale renewed appetite for US government bonds following a two-day selloff.
Traders buying bonds to exit earlier bond bets also spurred the market recovery despite an in-line report on domestic retail sales, which showed a healthy 1.2 percent rise in May, suggesting the US economy is regaining momentum from a winter lull.
Signs of a deadlock in Greece's debt talks rekindled safety bids for Treasuries, helping to send benchmark yields to their steepest one-day fall in over two weeks.
The bond market's rebound from its slump will likely be limited, analysts say, as investors turn cautious ahead of next week's Federal Reserve policy meeting, where the central bank may signal it will raise interest rates later this year.
"We backed up with Europe, and the 30-year auction went really well," said Larry Milstein, head of US government and agency trading at R.W. Pressprich & Co. in New York.
In afternoon US trading, the yield on 10-year Treasuries notes was down 8 basis points at 2.395 percent. Earlier, it had touched 2.500 percent, which was the highest since Oct. 1, according to Reuters data.
US yields remained in lock step with their European counterparts, which fell from their recent peaks due to strong demand at several sovereign bond sales across the euro zone.
Ten-year German Bund yields, a proxy for long-term European borrowing costs, ended at 0.891 percent, down 10 basis points in their biggest one-day fall since Feb. 2013.
Evidence of bond appetite overseas should bode well for domestic corporate and government debt slated for sale the rest of the week, analysts said.
The US Treasury Department sold two-thirds of the $13 billion in 30-year bonds it offered to investors.
Companies planned to issue more investment-grade bonds the rest of the week after raising nearly $30 billion the past three days, according to IFR, a unit of Thomson Reuters.
Meanwhile, there was no breakthrough in Greece's negotiation with its lenders on a deal to avert default.
The International Monetary Fund, which Athens owes a 1.6 billion euro payment at month end, said its delegation left the debt talks in Brussels due to major differences with the Greek government.
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