US Treasury prices succumbed to modest profit-taking, allowing yields to resume their trek higher on Thursday after a rally in the previous session briefly interrupted the bond market's losing streak. Medium- and long-term Treasury yields have been on the rise, a function of the Federal Reserve's accommodative monetary stance and investors' improved confidence in the economy and the financial system.
Selling accelerated in mid-afternoon after the Fed scheduled a smaller amount of Treasury purchases for the period starting Friday than it did for the period just ended a technical change with no policy implications. They run through March 9. Otherwise, the main event for the market on Thursday was the $16 billion auction of 30-year Treasury bonds.
Tuesday's $32 billion three-year note sale was notable for the absence of buyside demand, while the 10-year note auction that followed on Wednesday was remarkable for record indirect bids, viewed as a proxy for foreign demand. The $16 billion in 30-year bonds were sold at a high yield of 4.750 percent, with 66.45 percent of the bids awarded at the high. The ratio of bids received over those accepted was 2.51.
Primary government securities dealers, charged with underwriting US Treasury auctions, ended up with $7.81 billion of the sale. Indirect bids appeared to be higher than average, absorbing $6.88 billion of the $16 billion issue. The direct bid captured $1.274 billion.
In late trade, the new 30-year bond yielded 4.755 percent. The 30-year bond yield is now 225 basis points higher than where it was when a safe-haven bid driven by the financial crisis pushed it down to 2.5 percent in late 2008. Last August, before the Fed began its second phase of buying US Treasuries to spur lending and economic growth, the 30-year bond yielded 3.5 percent. Benchmark 10-year notes yielded 3.71 percent, up from 3.68 percent on Wednesday. Prices of two-year Treasuries slipped 2/32 and their yields rose to 0.85 percent from 0.82 percent late on Wednesday.