NEW YORK: US Treasury yields rose on Monday from Friday's multi-week lows in anticipation of a corporate bond offering from Microsoft, with profit-taking also fueling the move.
Microsoft is selling a seven-tranche US dollar bond Monday to finance its acquisition of LinkedIn, one of the banks managing the deal told IFR. Two market sources told IFR they expect the Microsoft bond to be US $15 billion in size.
The view that yields were likely headed higher after having fallen sharply on Friday, as well as investors' favoring the imminent Microsoft bond offering over US Treasuries, reduced demand for safe-haven US government debt. US 30-year Treasuries bore the brunt of the selling since the Microsoft offering includes several longer-dated issues, analysts said.
Orders for the offering have reached over US $30 billion, one of the banks managing the deal told IFR. US 30-year Treasuries prices fell more than a full point in price, with yields hitting a session high of 2.244 percent. Yields had hit a more than two-week low of 2.177 percent on Friday.
"The competition from the corporate sector is weighing on Treasuries," said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco.
Investors also took profits after the gain in Treasuries prices and drop in yields on Friday, which analysts said was magnified by institutional month-end buying.
"This is a little bit of a follow-through from late on Friday, when the prices got kind of silly because of month-end," said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York.
He also said Friday's weaker-than-expected US second-quarter gross domestic product growth data had reduced the likelihood of Federal Reserve interest rate increases any time soon, rendering Treasuries prices more vulnerable to daily flows and the pricing of corporate bond deals.
US 10-year Treasuries prices were last down 8/32 to yield 1.487 percent, after touching a more than two-week low in yield of 1.450 percent Friday.
Short-dated yields rose slightly.
US three-year Treasuries yields were last at 0.763 percent, from a nearly three-week low of 0.747 percent touched Friday.