Interessante
US Treasuries digest recent gains, eye new supply
Mon Feb 7, 2005 09:30 AM ET
NEW YORK, Feb 7 (Reuters) - Treasury debt prices were narrowly mixed in thin trade on Monday as the market digested recent hefty gains while preparing to swallow $51 billion in new U.S. government debt in the week ahead.
Friday's sub-par payrolls report triggered a vicious short-squeeze in the market, especially at the long-end where 30-year yields fell to their lowest levels since mid-2003.
With yields so low, traders are worried this week's auction of three-, five and 10-year paper could be shunned by private investors and foreign central bank.
Such nerves were not helped by a comment from Federal Reserve Governor Edward Gramlich that it was not clear how long foreigners would remain major buyers of U.S. debt.
"There's a lot of angst about the auctions and you can bet the market will react negatively to any shortfall in the indirect bidding stats," said one trader at a U.S. primary dealer.
Primary dealers are classed as direct bidders at auctions while indirect bidders include pretty much everyone else including foreign central banks.
"We're quietly optimistic, ourselves," added the trader. "Much of the market is still short and may use the auction as a way to close out positions. And there's a clear need for duration among many investors which could see the 10-year sale go well."
For the moment, though, caution ruled and price activity was minimal at best. The benchmark 10-year note (US10YT=RR: Quote, Profile, Research) was flat at 4.08 percent, but that follows a drop from 4.15 percent on Friday.
Yields on two-year notes (US2YT=RR: Quote, Profile, Research) ticked up to 3.31 percent from 3.29 percent. Five-year note yields (US5YT=RR: Quote, Profile, Research) rose to 3.69 percent from 3.68 percent.
In contrast long-dated debt remained in demand and the 30-year bond (US30YT=RR: Quote, Profile, Research) added 6/32 in price. Its yield dipped to 4.47 percent from 4.48 percent late Friday and 4.95 percent as recently as Christmas.
As a result, the spread between two- and 30-year yields narrowed to 116 basis points, the lowest reading since early 2001 and a long way from last year's peaks around 325 basis points.
There were no major U.S. economic data due on Monday and not much in the rest of the week, with December trade figures on Thursday the only real flash point.
Treasury's quarterly refunding kicks off with $22 billion of three-year notes (US3YT=RR: Quote, Profile, Research) on Tuesday, followed by $15 billion of five-year paper on Wednesday and $14 billion of 10-year notes on Thursday.
Last month's 10-year sale drew the second smallest share of indirect bids since Treasury began releasing the data in mid-2003, heightening worries about foreign demand.
Asian central banks bought massive amounts of Treasury debt for much of last year but the pace of buying has slowed markedly in recent months. Indeed, Fed data showed foreign central banks as a whole sold a net $12.9 billion of Treasuries in the latest week.
Traders are even concerned that central banks from China, Singapore and South Korea will not make an appearance at the auctions because of national holidays this week.