US Treasuries prices rose on Wednesday on a safety bid over peripheral European debt concerns and solid demand in a 10-year Treasury notes auction. Treasuries extended gains after the early afternoon sale of $21 billion of reopened 10-year notes brought a high yield that was below market expectations, indicating aggressive bidding for the securities.
"Today's 10-year auction showed continued strong demand for the sector via the auction process," said John Briggs, Treasury strategist at RBS in Stamford, Connecticut. "There were some concerns that with Japanese year end looming, foreign participation would hamper this auction, but the auction went well nevertheless." Treasuries gained early in the day with some safe-haven buying on peripheral European nations including Portugal paying untenably high yields to sell debt. The sale increased pressure on European Union leaders to reach a political solution to the region's debt crisis.
Benchmark 10-year notes were trading 26/32 higher in price to yield 3.46 percent, down from 3.55 percent late Tuesday. Trading volumes have declined this week as political upheaval in the Middle East and North Africa stoked oil prices and made investors reticent to hold positions.
Volumes in the last two trading days have been 20 percent lower than normal, according to CRT Capital Group. Five-year notes were trading 13/32 higher in price to yield 2.13 percent, down from 2.22 percent late Tuesday. Thirty-year bonds rose 1-6/32 in price to yield 4.59 percent, down from 4.67 percent. Bonds pared early gains on Wednesday after the Fed bought $6.69 billion of Treasuries, most maturing on February 29, 2016. "The buyback might have been a bit of a disappointment. Whenever you see (the Fed buying) all into one issue, it is not normally looked at as a high-quality buyback," said Ray Remy, head of US fixed income at Daiwa Securities in New York.