NEW YORK: US Treasury yields fell on Thursday ahead of a $28 billion sale of seven-year notes, the final part of $88 billion worth of coupon-bearing government supply this week.
The bond market held in a relative tight trading range as there have been no major economic data to alter investors' views on a growth rebound in the second quarter or signals from the Federal Reserve that it would be more aggressive on removing monetary stimulus.
"We are not going to break out this range unless there is a change on the outlook of the economy or the Fed is going to change its policy tune," said Brian Rehling, co-head of global fixed income strategy at Wells Fargo Investment Institute in St. Louis, Missouri.
The benchmark 10-year Treasury yield was 2.254 percent, down 1 basis point from late on Wednesday. It has bounced in a narrow 7 basis point range so far this week.
In "when-issued" activity, traders expected the new seven-year note to sell at a yield of 2.070 percent at 10:18 a.m. (1418 GMT), according to Tradeweb. This compared with a 2.084 percent yield at the prior seven-year auction in April.
Appetite for Treasuries was supported earlier this week by safe-haven demand in reaction to Moody's downgrade of China and the deadly suicide bombing in Manchester, England.
Fed minutes on its May 2-3 policy meeting, released on Wednesday, buttressed the notion it has adopted a gradual approach to shrinking its $4.5 trillion balance sheet even as it is expected to further raise short-term interest rates.
Analysts said the US central bank's cautious stance stemmed from anemic first-quarter economic growth and mixed data on business and consumer activity in the current quarter.
"Overall we would not be surprised by a strong (seven-year) auction after yesterday's dovish minutes and month-end extensions," Cantor Fitzgerald's Treasury strategist Justin Lederer wrote in a research note.
These supportive factors for Treasuries were mitigated by this week's hefty federal and corporate bond supply ahead of a three-day US holiday weekend, analysts said.
Companies have sold nearly $36 billion since Monday although issuance slowed on Thursday, according to IFR, a Thomson Reuters unit.
The US bond market will close early at 2 p.m. (1800 GMT) on Friday and will be shut on Monday for the US Memorial Day holiday.
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