By Joseph Adinolfi, MarketWatch
Corporate issuance draws capital away from Treasurys
NEW YORK (MarketWatch) -- Treasury yields closed higher for the
second consecutive day as more than $28 billion of newly announced
corporate debt drew demand away from Treasurys.
The yield on the 10-year note was up 2.8 basis points to 2.112%,
according to Tradeweb data. The two-year note yield was up two
basis points at 0.682%.
The yield on the 30-year bond was up 2.8 basis point to
2.713%.
Bond yields move inversely to prices.
An influx of newly issued corporate debt weighed on Treasurys,
as investors sold U.S. debt to make room for new bonds with more
attractive yields, said Donald Ellenberger, senior portfolio
manager and head of multisector strategies at Federated
Investors.
Actavis PLC (ACT) moved forward with a $21 billion bond offering
Tuesday. The company is raising money to pay for its acquisition of
Botox-maker Allergan Inc. (AGN) Exxon Mobil Corp. (XOM) also
announced plans to sell up to $7 billion in new bonds.
Ellenberger noted that heavy selling by portfolio managers to
accommodate Actavis's bond issue occurred Monday, after the Actavis
deal was initially announced.
Treasury yields have been steadily moving higher since the
10-year yield fell to its lowest level since April 2013 on Feb. 2.,
as a drumbeat of strong economic indicators out of the eurozone and
recovering oil prices have renewed demand for risky assets like
U.S. equities.
The one widely watched piece of U.S. economic data expected
Tuesday was new car sales figures, which showed a decline in sales
of total light motor vehicles in January.
Sales fell 1.2% to 16.7 million on an annualized basis, compared
with 16.9 million in December. Economists polled by MarketWatch had
expected 16.7 million in sales.
U.S. stocks finished the day lower Tuesday
(http://www.marketwatch.com/story/us-stocks-futures-retreat-after-nasdaq-breaks-above-5000-2015-03-03)
amid weak car sales and a dearth of significant economic
reports.
In other markets, the U.S. dollar's recent strength against the
euro caught the eye of bond investors, who were watching to see if
the dollar would resume its upward trajectory against the euro.
"There has been a pretty high correlation between the dollar and
Treasury yields over the last few months as the dollar has gone up,
yields have gone down," Ellenberger said. "In the event we see the
resumption of the bull trend, the dollar could pull Treasury yields
lower a bit."
The euro (EURUSD) traded lower against the dollar. The shared
currency traded at $1.1177, compared with $1.1183 Monday.
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