By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices climbed Tuesday after
a strong auction of 5-year notes, sending benchmark yields back
toward their lowest in over a year.
The 10-year Treasury note (10_YEAR) yield, which falls as prices
rise, was down 2.5 basis points on the day at 2.465%. In May, the
benchmark yield touched its lowest point in over a year at
2.438%.
Tuesday's move comes ahead of a surge of U.S. economic news,
including a second-quarter GDP report on Wednesday morning, a
statement from the Federal Reserve's policy committee that
afternoon, and a nonfarm payrolls report on Friday.
European bond yields also fell on Tuesday, with the 10-year
German bund yield dropping 3 basis points to 1.120%, its lowest
ever on a closing basis. The 10-year Spanish bond yield fell 2
basis points to 2.474%. It briefly dipped below comparable U.S.
Treasurys on a nominal basis.
Treasurys got a boost after an auction of $35 billion in 5-year
notes, which came in strong, despite investor nervousness about
shorter-term debt. These are the stats from the auction:
* The notes sold at a yield of 1.720%.
* The ratio of bidders to the amount sold was 2.81 times,
compared with 2.80 times in the last six sales.
* Direct bidders, which include domestic money managers, showed
up in force, buying 25.9% of the sale, compared to 13.6% in recent
sales. Indirect bidders, often a proxy for foreign demand, bought
up 48.2% of the sale, versus the recent average of 49%. Combined,
buyers took down a record amount of debt for an auction of 5-year
note, according to Stone & McCarthy Research Associates.
Here's what moved the bond market on Tuesday:
* The deteriorating situation between Russia and Ukraine sent
continued tremors across the bond market as the European Union
agreed to tougher sanctions on Russia. The U.S.expanded sanctions
as well late Tuesday.
* The Case-Shiller 20-city composite index showed decceleration
in the rate of home-price growth. Steven Ricchiuto, chief economist
at Mizuho Securities, wrote in a research note: "This downshift in
prices reflects the fact that the housing market has lost its
upside momentum despite the low level of yields."
* Consumer confidence data showed the highest reading since
2007, helping Treasurys cut gains.
* Shorter-term maturities in the U.S. Treasurys market posted
narrower gains. Market participants have remained cautious on the
so-called belly-of-the-curve, which could be sensitive to shifts in
the monetary policy outlook, based on big data releases or the Fed
statement this week. That has resulted in a narrowing of the
differential between the 5-year note and 30-year bond. Read more
about what it means.
The 5-year note (5_YEAR) yield was down 1.5 basis points at
1.688%. The 30-year bond (30_YEAR) yield fell 3.5 basis points to
3.226%. The spread between them was last at 1.54 percentage points,
its smallest since the beginning of 2009 on a closing basis.
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