By Saumya Vaishampayan, MarketWatch
NEW YORK (MarketWatch) — Treasurys fell on Wednesday, pushing yields higher, as the Treasury Department prepared to sell $24 billion in 10-year Treasury notes at 1 p.m. Eastern.
Yields on the benchmark 10-year Treasury note 10_YEAR +1.92% rose 3 basis points to 2.02% in morning trading. Yields move inversely to prices and one basis point is one one-hundredth of a percentage point.
“Today’s 10-year and tomorrow’s 30-year auctions are the real tests for the week,” said Guy LeBas, fixed-income strategist at Janney Montgomery Scott.
Short positions on Treasurys have reached the highest level in 20 months, according to J.P. Morgan’s weekly Treasury client survey. Investors short Treasurys when they expect prices to fall.
Investors holding short positions are likely to use the auction to buy back in, LeBas said. “My expectation is that we actually see pretty good demand because of short covering,” he said.
The Lunar New Year, which closed markets on Wednesday in Hong Kong, Taiwan and mainland China, is creating some nervousness about demand ahead of the auction, LeBas added. The holiday pushed indirect bids to record lows in Tuesday’s auction of 3-year notes.
Yields on the 30-year bond 30_YEAR +1.04% rose 3 basis points to 3.22% and yields on the five-year note 5_YEAR +3.22% rose 6 basis points to 0.9%.
The market didn’t react to Wednesday’s retail sales report, which showed an increase of 0.1% in January.
On Wall Street, stocks were mostly higher; the Standard & Poor’s 500 Index SPX -0.01% rose 0.2%, or 2.74 points, to 1,522.16. The Nasdaq Composite Index COMP +0.24% gained 0.5%, or 15.93 points, to 3,202.58, while the Dow Jones Industrial Average DJIA -0.37% fell 0.2%, or 25.16 points, to 13,993.39.
The 10-year note’s yields posted a “moderate” gain Wednesday of 3 basis points, pushing them to the high end of the range this year, Janney’s LeBas said.
The Treasury Department is scheduled to sell $16 billion in 30-year bonds in an auction on Thursday.
Saumya Vaishampayan is a MarketWatch reporter based in New York.
