MW: Treasurys slip on poor auctions, labor recovery
By Wallace Witkowski and Laura Mandaro, MarketWatch
SAN FRANCISCO (MarketWatch) — U.S. Treasurys continued to lose ground Thursday following lackluster auctions earlier in the week, sending yields higher, as jobless claims dropped ahead of a 30-year bond auction.
Yields on the 10-year note 10_YEAR +1.79% rose 2 basis points to 1.71% as prices, which move inversely to yields, slipped. Yields on the 30-year bond 30_YEAR +0.94% gained nearly 3 basis points to 2.78%. One basis point is 1/100th of a percentage point.
At 1 p.m. the Treasury will announce results from a $16 billion auction of 30-year note.
The prior two auctions of the week, of 10-year and 3-year notes 3_YEAR +2.02% , have shown weak demand as investors have stayed away from debt after a steep rally earlier this year. The 10-year note’s yield is now about 30 basis points higher than record low yields touched in July, at the height of a recent panic over Spanish debt.
“Those auctions are having a negative impact,” said Kevin Flanagan, chief fixed-income strategist for Morgan Stanley Smith Barney. “The market is feeling it’s going to get some policy maker response soon, so you lose a little bit of the safety premium.”
Flanagan said he expects the 30-year auction to be “mediocre at best” given the poor demand in Wednesday’s 10-year auction. Read more on Wednesday's 10-year auction.
Earlier in the session, yields turned higher after the Labor Department said the number of Americans filing for jobless benefits fell 6,000 to 361,000 last week, contrary to an expected rise to 370,000. Read more on jobless claims.
Stocks, which had risen slightly in early trade, started to dip into negative territory in recent activity. For much of the week, investors have made a low-volume shift into equities, away from safe-havens such as Treasurys.
“The initial jobless claims data over the last three weeks hint at a slowing in the rate of gross job losses (and thus higher net job creation) compared to the April-June timeframe,” wrote John Ryding and Conrad DeQuadros of RDQ Economics, in a note.
“The labor market is suddenly not looking quite so moribund,” they added.
Also on Thursday, the Treasury said it would sell $25 billion in 15-day cash-management bills on Tuesday.
Wallace Witkowski is a MarketWatch news editor in San Francisco.
Laura Mandaro is a MarketWatch editor, based in San Francisco.
