U.S. selling $35 billion in 5-year debt during session
By Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) — Treasury prices fell slightly Wednesday, pushing yields upward, after a report showed the U.S. economy grew a little faster than previously estimated in the second quarter.
Still to come is the government’s sale of 5-year notes and the release of the Federal Reserve’s Beige Book, a compilation of economic anecdotes that officials will use at their next meeting in deciding whether the economy needs further easing in monetary policy.
Yields on 10-year notes 10_YEAR +2.08% , which move inversely to prices, rose 3 basis points to 1.66%. Yields have fallen in seven of the prior eight sessions. Read more on the Treasury rally.
A basis point is one one-hundredth of a percentage point.
Thirty-year yields 30_YEAR +1.24% increased 3 basis points to 2.78%.
Yields on 5-year notes 5_YEAR +2.78% added 2 basis points to 0.69%.
Most investors remained focused on adjusting expectations and positions ahead of the Fed’s Jackson Hole conference, with a keynote address by Chairman Ben Bernanke the main highlight, particularly after European Central Bank chief Mario Draghi’s cancellation.
U.S. gross domestic product grew at a 1.7% pace in the second quarter, a little faster than previously estimated by the government and in line with analysts’s expectations. See story on the GDP.
Bonds extended their decline after a report showed pending home sales climbed in July. Read more on pending home sales.
At 1 p.m. Eastern time, the Treasury Department will sell $35 billion in 5-year notes, the second of three major auctions this week. See recent auction results.
“Five-year notes “tend to benefit at the cost of 2-year notes, and we could see this trend reassert itself, especially as expectations around Jackson Hole continue to build,” said strategists at Nomura Securities.
At the last six auctions, bidders offered to buy an average of 2.86 times the amount of debt sold, according to Nomura.
Indirect bidders, a group which includes foreign central banks, bought an average of 41.9% of those sales.
Direct bidders, a group which includes domestic money managers, purchased another 9.3% on average.
The Fed will release the Beige Book at 2 p.m. Eastern. The information from the Fed regional banks is expected to reflect the better economic data that have come out in recent weeks. That will be compared with the minutes from the last Fed Open Market Committee that was seen as very dovish and raised speculation that the central bank would launch a new bond-purchase program — sometimes called a third round of quantitative easing, or QE3.
“It could be that we get a Beige Book that should be more upbeat than the last FOMC minutes and, of course, sets some groundwork for the next meeting,” said bond strategists at CRT Capital Group. “To the extent the minutes whetted QE3 appetites then the Beige Book could cause some queasiness.”
Deborah Levine is a MarketWatch reporter, based in New York.
