Yield curve steepens before 30-year auction

NEW YORK: US Treasury yields rose on Thursday and the yield curve steepened before the government will sell $23 billion in 30-year bonds, the final sale of $108 billion in new coupon-bearing supply this week.

The Treasury has been increasing the size of its auctions across the curve as it pays for stimulus meant to boost the economy after coronavirus lockdowns.

The Treasury saw weak demand for a record large sale of 30-year bonds at its August refunding. Thursday's auction is up from $19 billion at July's reopening but below the $26 billion sold last month.

"The curve is steepening a little today, consistent with the supply this week," said Jon Hill, an interest rate strategist at BMO Capital Markets in New York.

Benchmark 10-year note yields rose less than a basis point to 0.710%. Thirty-year bond yields increased one basis point to 1.473%.

The yield curve between two-year and 10-year notes steepened one basis point to 56 basis points and the curve between five-year notes and 30-year bonds steepened two basis points to 118 basis points.

The Treasury saw slightly soft demand for a $35 billion sale of 10-year notes on Wednesday, and a record $50 billion sale of three-year notes on Tuesday.

The Treasury market is also taking cues from the stock market, which has seen increased volatility for the past week.

"In some ways rates are beholden to the path of stocks at least in a short time frame, just because there are a lot of concerns about these elevated equity valuations and if we see a substantial leg lower in equities it's likely that we're going to see a significant rally in bonds," Hill said.

Wall Street's main indexes opened higher on Thursday as momentum from demand for cheaper tech-related stocks overshadowed elevated weekly jobless claims that suggested a choppy economic rebound.

Data on Thursday showed that the number of Americans filing new claims for unemployment benefits hovered at high levels last week, strengthening views that the labor market was settling into a more gradual path of recovery from the coronavirus pandemic.