US Treasury yields fell on Wednesday as higher yields lured fund managers and other investors back to the market, and after an auction of new 10-year notes saw solid demand. Bond yields had increased to one-month highs earlier on Wednesday as investors prepared for new Treasury sales in addition to heavy corporate debt supply. The US high-grade bond market was on course for its busiest day of the year by number of deals. The higher yields later drew buyers back to the market, with investors that had bet on further yield increases also covering their positions, adding to the rally.
"Everybody tried to play the game on corporate supply from the short side, but it was met with real buying," said Tom Tucci, head of Treasuries trading at CIBC in New York. Benchmark 10-year notes were last up 3/32 in price to yield 2.18 percent, after earlier rising as high as 2.25 percent, the highest since August 7. The Treasury saw solid demand for a $21 billion sale of 10-year notes, the second sale of $58 billion in new coupon-bearing supply this week.
That demand may also help the government auction $13 billion in 30-year bonds on Thursday. "The long end of the yield curve has been beaten pretty badly lately and real money investors found some value here," said Thomas Simons, a money market economist at Jeffries & Co. Simons added that he expects buyers who were interested in the 10-year note to show interest in the 30-year bond auction. Strong jobs data also kept alive some investors' expectations that the Federal Reserve may raise interest rates next week for the first time in almost a decade. US job openings surged to a record high in July and employers appeared to have trouble filling openings, according to the monthly Job Openings and Labor Turnover Survey, or JOLTS.
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