Ten-year notes auction, Fed’s September meeting minutes on tap
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices fell again Wednesday, pushing yields on 10-year notes to their highest level since late August, as further optimism that the European Union will devise a plan to address its sovereign-debt issues reduced interest in the relative safety of U.S. debt.
Yields on 10-year notes 10_YEAR +2.98% , which move inversely to prices, rose 6 basis points to 2.22%. They touched 2.23%, their highest level on a closing basis since Aug. 29.
A basis point is 1/100th of a percentage point.
Yields on 30-year bonds 30_YEAR +2.87% increased 8 basis points to 3.18%
Two-year note yields 2_YEAR +1.62% were little changed at 0.31%.
Part of the optimism relates to a plan for recapitalizing Europe’s banks to be proposed soon by European Commission President Jose Manuel Barroso.
More than anything else, the brisk selloff in the Asian and European sessions came on the back of “the anticipation of details about EU plans to recapitalize banks,” said David Ader and Ian Lyngen, bond strategists at CRT Capital Group, in a note.
The euro EURUSD +1.06% rose markedly against the U.S. dollar, with analysts also noting that the delay in Slovakia’s approval of Europe’s bailout fund isn’t expected to last long. Read about euro, Slovakia.
Later in the session, the government will sell $21 billion in 10-year debt.
The auction is the second of three this week. Tuesday’s 3-year note sale 3_YEAR +5.94% garnered tepid demand. Read about Treasury’s 3-year auction.
On Thursday, the Treasury Department will auction 30-year bonds.
Analysts say investors may find the auction attractive because yields are up from 2% at the last sale about a month ago.
Also Wednesday, the Federal Reserve will release minutes from its last policy meeting when it announced a plan, known as “Operation Twist,” to buy longer-dated debt and sell its shorter-term holdings.
Quoting the Fed’s policy statement from that meeting, strategist at Nomura Securities said “we hope to get more details on the ‘significant downside’ risk to the outlook, but more importantly, what tools were discussed as indicated by the committee’s statement that it, ‘discussed the range of policy tools available to promote a stronger economic recovery.’ ”
Bonds have reversed much of the rally since the plan was announced, on Sept. 21. The day before the Fed announced the plan, 30-year bonds yielded 3.21% and 10-year notes were at 1.95%. The latter fell to a record low under 1.80% earlier this month.
Two-year notes yielded around 0.16%, near their record low for the security.
