NEW YORK—Prices of Treasury debt rose, recouping some losses from recent sessions as their higher yields made the securities appear attractive to many investors.
The buying was a reprieve for a market under pressure from recent upbeat U.S. economic data that raised optimism and dimmed the allure of safe-haven Treasurys. Selling had also been spurred by continued sales of government debt to fund a budget shortfall of more than $1 trillion this year.
The 10-year note's yield, the benchmark for fixed-rate consumer and corporate borrowings, broke 4% Monday for the first time since June, touching its highest level since October 2008.
"Yen-based investors and others drew a line in the sand with last night's buying and this will probably give a boost to the upcoming auctions as dealers now see that there are willing buyers" at the current yield levels, said William O'Donnell, head of U.S. government bond strategy at RBS Securities in Stamford, Connecticut.
As of Tuesday morning. the two-year note was 2/32 higher in price, yielding 1.148%; the 10-year note was up 10/32, pushing down the yield by 0.042 percentage point to 3.954%; and the 30-year bond was 8/32 higher to yield 4.826%. Bond yields move inversely to prices.
The Treasury market also received some safe-haven demand Tuesday as concern resurfaced about the fiscal and debt problems in Greece. Fear that Greece may be trying to renegotiate the terms of the rescue package put together at a summit of European Union leaders last month was the main factor depressing market sentiment.
Reports suggested that the country is hoping to exclude the International Monetary Fund from its aid package so that it isn't forced to adopt the onerous austerity measures that are likely to accompany any IMF funding. Greece's plans remained unclear.
Concern over Greece has also risen following other reports that Greek banks have been facing large withdrawals. Further, the country is preparing to raise $5 billion to $10 billion through a bond offering aimed at U.S. investors now that appetite for Greek paper appears to have declined elsewhere.
The recent rise in Treasurys' yields spurred strong demand in Monday's auction of $8 billion Treasury inflation-protected securities. But the real test will come from other debt sales this week, including an auction of $40 billion in three-year notes at 1 p.m. EDT, followed by $21 billion in 10-year notes Wednesday and $13 billion in 30-year bonds Thursday.
Demand was weaker than expected during the sale of $118 billion of government notes two weeks ago. Further tepid demand at the auctions could fuel worries over the high U.S. fiscal deficit and the huge amount of debt sales needed to fund the shortfall, which would lift bond yields and raise borrowing costs for consumers and businesses.
At 2 p.m., the Federal Reserve is scheduled to release its minutes for the March rate-setting policy meeting. Investors will focus on details of how policy makers discussed the outlook for interest rates, especially any clues about when they will start lifting interest rates given recent strong economic data.
The Fed has held the fed-funds target rate within the range of zero-0.25% for more than a year. After last month's meeting, they said the rate is likely to stay at record-low levels for an extended period.
