Treasuries decline

US Treasuries prices fell on Wednesday after weak demand for a debt sale dampened gains built on Federal Reserve Chairman Ben Bernanke's assurances US interest rates will remain low. In a day of choppy trade, the lacklustre reception for $35 billion in five-year notes overshadowed weaker than forecast durable goods orders that earlier lifted bond prices from session lows.
Another influence was the Fed's purchase of $4.81 billion of Treasuries maturing between August 2020 and November 2021. The purchases helped the bond market erase its morning losses, leaving it flat to slightly higher by early afternoon before the Treasury auction.
Treasury losses widened when the stock market began to erase some of the day's worst losses and the S&P 500 index clung to the 1,400 level, hurting the bid for safe-haven US debt. In afternoon trade, the benchmark 10-year Treasury note was down 5/32, its yield rising to 2.20 percent from 2.18 percent late on Tuesday.
"The market is still trying to digest Ben Bernanke's recent remarks to determine where yields should be at this point," said James Barnes, senior fixed income portfolio manager at National Penn Investors Trust Company in Wyomissing, Pennsylvania. Bonds gave back some of Tuesday's gains, as traders pared back bullish bets in anticipation of possible hints from Federal Reserve Chairman Ben Bernanke in a rare television interview that the US central bank might embark on a third round of large-scale bond purchase, known as QE3, to boost sluggish US economic growth.
Bernanke told ABC news on Tuesday, "It's far too early to declare victory" in the domestic recovery, a view which he expressed on Monday. Those remarks helped shore up the bond market after it saw the worst weekly sell-off since last June more than a week ago. Despite some promising signs from the labour market and less financial distress in Europe, Bernanke said, "we need to be cautious and make sure this is sustainable." The improvement in the US economy appears to have plateaued with mild pullbacks in housing and manufacturing activities.
The government said durable goods orders rose 2.2 percent in February after a surprising 3.6 percent drop in January. Analysts had predicted a 3.0 percent increase. The 30-year bond was down 8/32, its yield rising to 3.31 percent from 3.30 percent on Tuesday. The 30-year is below its 4-1/2-month high of 3.4920 percent set last Monday and its 200-day moving average of 3.3628 percent.