NEW YORK: US Treasury yields fell on Wednesday in advance of a record-setting $18 billion 30-year bond sale, the final leg of this week's $78 billion in the government's quarterly debt refunding.
The 30-year auction followed solid demand for $26 billion of 10-year notes sold on Wednesday.
Earlier Thursday, a 30-year Japanese government bond auction drew firm buying from investors.
Persistent demand from pension funds to ensure steady income to meet their future payouts, as well as relatively attractive US yields, will likely stoke bids for the latest 30-year issue, analysts said.
"We should see decent demand," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.
He cautioned that if the 30-year yield does not rise from its session low before the 1 p.m. (1700 GMT) bidding deadline, it reduces the appeal of the latest 30-year supply.
In "when-issue" activity, traders expected the upcoming 30-year issue to sell at a yield of 3.095 percent, Tradeweb data showed. This was higher than the 2.958 percent yield at the prior 30-year auction in July.
At 10:23 a.m. (1423 GMT) on the open market, the 30-year yield was down 2 basis points at 3.097 percent, while the benchmark 10-year yield was more than 2 basis points lower at 2.940 percent.
Longer-dated US yields have risen in the past month partly on speculation over whether the Bank of Japan would scale back its five-year-old ultra loose policy to support its economy.
Last week, the BOJ pledged to maintain its massive stimulus program, and made some policy adjustments, including toleration of a rise in the yield on the domestic 10-year bond to about 0.20 percent, from 0.10 percent previously.
The BOJ's stimulus plan and European Central Bank's 2.55 trillion euro bond program are seen playing major roles in holding down US bond yields.
Mild domestic inflation, together with Federal Reserve's rate-increase campaign, have also supported demand for longer-dated US Treasuries, analysts said.
The US Labor Department said on Thursday producer prices were unchanged in July, falling short of a 0.2 percent increase expected by analysts polled by Reuters.
The PPI report precedes the release of the consumer price index in July at 8:30 a.m. (1230 GMT) on Friday.
Economists forecast that the CPI likely rose by 0.2 percent last month, bringing its year-over-year increase to 3.0 percent. The core CPI, which excludes volatile food and energy prices, is expected to increase 2.3 percent from a year earlier.
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