By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices held onto losses Wednesday after a report showed pending home sales dropped. As a result, yields resumed their climb higher after the benchmark 10-year note yield saw its biggest three-day drop in over a year.
The 10-year note 10_YEAR +1.99% yield, which moves inversely to price, rose 5.5 basis points to 2.769% while the 30-year bond 30_YEAR +1.22% yield fell 5.5 basis points to 3.750%.
The 5-year note 5_YEAR +3.15% yield fell 5.5 basis points to 1.574% ahead of an auction of $35 billion of the notes at 1 p.m. Eastern.
U.S. government debt held losses after data on Wednesday showed pending home sales fell 1.3% in July, a further indication that rising mortgage rates may be having an adverse impact on the housing market. Nonetheless, the gauge of sales contracts on homes is up 6.7% over a year ago.
Treasurys, which usually benefit when investors get worried about the economy or global geopolitical concerns, rallied on Friday after new home sales showed a surprising drop. That push lower in yields extended into this week as weak data and concerns about tensions in Syria continued to weigh.
But yields have been on an upward trajectory for nearly four months, climbing over a full percentage point on the 10-year note since bottoming out at the beginning of May as worries about monetary policy linger.
Investor fears over Federal Reserve plans to curb its $85 billion in monthly bond purchases has investors worrying about less accommodative monetary policy. Central bankers have suggested that the first purchase reductions would occur before year-end, but the market has largely priced in tapering at the Fed’s September policy meeting.
Nonetheless, the recent rally may cut into demand for the 5-year notes when they go to auction on Wednesday.
“Relative value doesn’t stand out one way or another in our view,” said Stanley Sun, strategist at Nomura Securities, of the attractiveness of 5-year notes.
Yields were higher on United Kingdom bond, or gilts, after the Bank of England’s new governor, Mark Carney, signaled in his first speech that interest rates will remain low even after unemployment falls below 7%. The UK 10-year gilt BX:TMBMKGB-10Y +1.46% yield rose 3.5 basis points to 2.822%. The 10-year German bond, or bund BX:TMBMKDE-10Y +1.78% yield rose 2.5 basis points to 1.877%.
Ben Eisen is a MarketWatch reporter based in New York.
