Treasuries add to losses after auction disappoints
Thu Feb 10, 2005 01:48 PM ET
(Updates comment, prices after 10-year auction)
By Ellen Freilich
NEW YORK, Feb 10 (Reuters) - Treasury debt prices extended early losses on Thursday as an auction of new U.S. government paper drew disappointing private demand, souring what was otherwise a well-received quarterly refunding.
The sale of $14 billion in 10-year Treasury notes went at a higher-than-expected yield of 4.049 percent. It drew bids for only 2.05 times the amount on offer, weaker than November's 2.68 level and the long-run average of 2.14.
Indirect bidders, a class that includes foreign central banks, picked up a slim $3.94 billion, or 28 percent, of the whole issue. That was down from November's 40.5 percent share and the lowest for a non-reopening since May 2003. Primary dealers were left with $9.80 billion of the sale.
Treasuries had already been suffering profit-taking on recent hefty gains and the current 10-year note (US10YT=RR: Quote, Profile, Research) lost 18/32 in price, lifting yields to 4.06 percent from 3.99 percent on Wednesday.
Josh Stiles, senior bond strategist at IDEAglobal, said bidding in the auction was much more cautious than it had been in the first two auctions of the Treasury's quarterly refinancing effort. The Treasury sold three-year notes on Tuesday and five-year notes on Wednesday.
"The market got it a little cheaper, but that also indicates that demand wasn't that great," he said.
Demand was tepid even though prices were already cut on Thursday heading into the auction deadline.
Stiles said because of talk about pension fund legislation that might lead to funds having to buy more bonds, there was hope among bond bulls that pension funds would be good investors in the 10-year notes. But that did not materialize.
The day's economic data helped power the selling. Initial jobless claims fell to 303,000 last week, well below the rise to 325,000 analysts had forecast. That was the lowest in four years and suggested the next payrolls report could prove stronger than the disappointing January reading.
The December trade deficit narrowed to $56.4 billion, against forecasts of $57 billion, while November's shortfall was revised to a smaller $59.33 billion.
That in turn suggested some risk of an upward revision to fourth-quarter economic growth, though analysts noted that the inflation-adjusted deficit had not narrowed nearly as much and it was this figure that mattered for GDP calculations.
The 30-year bond (US30YT=RR: Quote, Profile, Research) , whose yield has plunged 50 basis points since the start of the year to hit a 1-1/2 year trough, fell one-and-a-half points as traders booked profits on a trade that had bet on a flatter yield curve.
That lifted the 30-year yield to 4.46 percent from 4.37 percent late on Wednesday.
Yields on the two-year note (US2YT=RR: Quote, Profile, Research) rose to 3.29 percent from 3.25 percent. The new five-year note (US5YT=RR: Quote, Profile, Research) was yielding 3.65 percent.
- adesso sperem in un bel collasso del bund domani - buona serata 
- o sono "contrarian" che si devono coprire, o sono ricoperture su flussi dall'Asia in notturna, o sono una manica di strunz 
- calma e sangue freddo, preparo un'altra tanica di caffè, stecca di sigarette e aspettiamo lungo il fiume 8)
