Treasury prices fall

US Treasury debt prices fell on Thursday but the main driver for their declines seemed to be positioning ahead of the afternoon's 30-year Treasury bond auction, after which losses in the market faded somewhat. The US Treasury sold $13 billion in re-opened 30-year bonds at a high yield of 3.23 percent, which matched the 30-year yield in the open market at the time.
Kevin Walter, global head of Treasury trading at BNP Paribas in New York, said prices bounced slightly once traders saw that a support level identified on the 30-year's price had held. This calmed worries in the market that the selling in Treasuries would take prices all the way back to lows reached just before last Friday's payrolls report from the US Labour Department, which showed lower-than-expected job growth in March.
"The fact that that held, we've gotten through the supply for the week, and we have seen marginally better buying by asset managers, both in the auction and afterwards too, I think we're bouncing a little," Walter said. Pressure on Treasury prices came from US stocks, which often move inversely to Treasury prices. The major US indexes rose by over 1 percent on Thursday after concerns eased about rising government debt yields in some euro zone countries and on bets corporate America will beat a lowered bar for earnings expectations.
Earlier, bonds had been on a firm footing because of unexpectedly high jobless claims data for last week that reinforced recent payroll data showing the US labour market continues to struggle. Also, a below-forecast, zero increase in the producer price index in March fuelled speculation the Federal Reserve could eventually step in with a third round of debt buying, or monetary stimulus known as quantitative easing.
"Claims were the highest in almost three months and inflation pressures appear to be easing off, at least as measured by PPI," said Thomas Simons, money market economist at Jefferies & Co in New York. "These two data points will add more fuel to the fire for the debate over QE3," he said, referring to talk that the Fed could decide to buy more Treasuries or mortgage-backed securities in a third bout of quantitative easing.
Benchmark 10-year notes were trading 7/32 lower to yield 2.06 percent, up from 2.04 percent late Thursday, while the 30-year bond was 14/32 lower to yield 3.22 percent from 3.19 percent. Expectations of further monetary stimulus were bolstered last week after the government reported much smaller jobs growth in March than had been expected.