US Treasuries prices fell for a second day on Tuesday in choppy trading on a wave of corporate bond supply and upbeat housings starts data that revived expectations the Federal Reserve may increase interest rates later this year. Traders scaled back their bond holdings on news that domestic home builders broke ground at the fastest pace in nearly 7-1/2 years in April.
The selling was swift, sending 30-year bond prices down as much 1-13/32 points before they recovered on bargain-hunting and exiting of earlier short positions, analysts and traders said. The latest homebuilding figures were an exception to the recent spate of disappointing data on business activity and consumer spending, which suggest a modest rebound following a likely first-quarter US economic contraction.
"The housing starts data were very strong. Now the test will be whether US yields could stay at these levels," said Jim Caron, portfolio manager at Morgan Stanley Investment Management in New York. A growing supply of corporate bonds added selling pressure on Treasuries, propelling their yields closer to the 5-1/2 month peaks seen last week. The European Investment Bank, Goldman Sachs and several companies sold debt on Tuesday after $18 billion in the investment-grade bond market on Monday, according to IFR, a unit of Thomson Reuters.
Earlier, the US government debt market rose with gains in European bonds after Benoit Coeure, a top European Central Bank official, said it would pick up its bond purchases in May and June due to slow market activity in July and August. The step-up in purchases for ECB's 1.1-trillion-euro quantitative easing program that began in March came as Greece and its creditors are still seeking terms for a deal that will unlock more cash for the debt-laden nation.
The yield on German 10-year Bunds was down 2 basis points at 0.633 percent, while the yield on 10-year Greek sovereign bonds retreated from a 2-1/2 week high to 11.18 percent. US trading was volatile with the 30-year Treasuries yield moving within a 12 basis point range. The 30-year bond last traded 16/32 point lower in price, yielding 3.045 percent, up 3 basis points on the day. Benchmark 10-year Treasuries notes were down 11/32 in price to yield 2.267 percent, up 4 basis points from late on Monday. A week ago, 10-year and 30-year yields reached 5-1/2 month peaks at 2.366 percent and 3.128 percent, respectively, according to Reuters data.