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On
Wednesday, the market absorbed a $24 billion reopening of
10-year notes and on Thursday a $16 billion reopening of 30-year
bonds was scheduled.
The benchmark 10-year yield rose 4.5 basis points on Wednesday
to 1.584%, after the auction was met with slightly soft demand.
The measure of overall auction demand was 2.43, close to recent
averages. Fund managers, foreign central banks and other
indirect bidders bought 58.5% of the offering, the smallest
takedown for a reopening since January.
"The market has been beaten up quite a bit today, and the
auction came right at the lows of the day. The small short stop
suggests that the market generated a sufficient concession,"
said Tom Simons, senior money market economist at Jefferies.
The 30-year bond yield was up 4 basis points ahead of Thursday's
auction. Record amounts of 10- and 30-year debt have been sold
by President Donald Trump's Treasury Department as his
administration has increased government spending while revenue
has shrunk due to tax cuts.
Yields may have also been pressured higher on increased hopes
for a trade resolution after Bloomberg reported China was still
open to agreeing to a partial trade deal with the United States,
citing an official with direct knowledge of the talks.
Separately, the Financial Times citing unnamed sources reported
that Chinese officials were offering to increase annual
purchases of U.S. agricultural products.
Still, some analysts were skeptical of the effects of the trade
developments on the Treasury market.
"It's really difficult to see any signs of progress or change.
It's difficult because you don't want to ignore headlines, but
at the same time each headline seems to say the same thing -
that both sides want to see something happen and both sides are
encouraged that something may happen," said Michael Lorizio,
senior fixed income trader at Manulife Investment Management.
Also on Wednesday, a readout of the minutes from the last
Federal Open Market Committee meeting showed that policymakers
supported the need for an interest rate cut in September, but
remained increasingly divided on the path ahead for monetary
policy.
On Tuesday, Fed Chair Jerome Powell flagged openness to more
rate cuts to mitigate against such risks, repeating that the
central bank will act "as appropriate."
(Reporting by Kate Duguid; Editing by Steve Orlofsky and David
Gregorio)
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