MW: Treasurys lose ground before last auction of week
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices declined in early trading Wednesday, pushing longer-term yields higher, before the government’s last auction of the week.
It will sell $29 billion in 7-year notes (UST7YR 1.86, +0.01, +0.65%) , accepting bids until 1 p.m. Eastern time.
Yields on 10-year notes (UST10Y 2.48, +0.01, +0.28%) , which move inversely to prices, rose 1 basis point to 2.48%. A basis point is 0.01%.
Yields on 2-year notes (UST2YR 0.43, 0.00, 0.00%) were little changed at 0.43%, after recently touching an all-time low.
The Treasury Department saw solid demand at its auctions of 2-year and 5-year notes (UST5YR 1.27, +0.04, +3.09%) this week, with both sales coming at record-low yields for the maturities. Read more on 5-year auction,
Analysts noted that investors who try to keep pace with benchmark indexes usually have to buy bonds at the end of the month, which will likely limit a decline.
Also, bonds have risen in the past two days, pushing 10-year yields down by about 15 basis points. That buying stemmed from month-end positioning as well as weak data and continued expectations that the Federal Reserve will start a new bond-purchase program in coming months.
Such a program is often considered quantitative easing, and the predicted one has been dubbed “QE2” by some in the financial markets.
“We’ve priced in the expectation of QE2 and reached critical levels that should provide a strong headwind to a further rally,” said strategists at CRT Capital Group. “It’s a tactical call, as I firmly believe asset purchases are coming that will compress yields, but for now take profits.”
Three Fed officials have speeches slated during the session, so traders will listen for any comments about the outlook for the economy or monetary policy.
Late Tuesday, Dennis Lockhart, the president of the Atlanta Federal Reserve Bank, said Fed officials have not reached agreement on whether the central bank should purchase more Treasurys or other assets to pump up the economy. Read more on Fed’s Lockhart.
