Fed's tone could help companies issue debt, Informa says By Deborah Levine, MarketWatch NEW YORK (MarketWatch) -- Treasury prices declined on Wednesday, pushing yields up, as analysts worry about investors' demand before the government's sale of 10-year notes. "Today's 10-year auction will be a key litmus test to help determine how real the demand for long-term Treasurys is at low yield levels," said strategists at Nomura Securities. Yields on 10-year notes (UST10Y 3.23, +0.04, +1.38%) , which move inversely to prices, rose 4 basis points to 3.23%. A basis point is 0.01%. Yields on 2-year notes (UST2YR 0.76, +0.02, +2.15%) rose 1 basis point to 0.76%. The Treasury Department will accept bids for $21 billion in 10-year notes auction until 1 p.m. Eastern time. The auction is a reopening, meaning the debt being sold will mature on the same date and carry the same coupon as quarterly-issued securities, in this case sold last month. The amount is the same as at the previous reopening of the benchmark security. At the past four reopenings of 10-year notes, bidders offered to buy an average of 3.20 times the amount of debt sold. Indirect bidders, a group that includes foreign central banks, bought 35.5% of the sales, on average. Direct bidders, a group that includes domestic money managers, purchased another 15%. "Our general view is that participation will be rather lukewarm especially if stocks stay in positive territory," said Tom di Galoma, head of U.S. rates trading at Guggenheim Partners. On Tuesday, the government saw solid demand for its offering of 3-year notes, at yields at the lowest since early 2009. See more on 3-year auction results. Still, the day's decline has been limited, even after Federal Reserve Chairman Ben Bernanke said the U.S. economy is strong enough to withstand the fiscal tightening that is ahead and the Dow Jones Industrial Average (DJIA 10,049, +108.98, +1.10%) rose back above 10,000. Read about U.S. stocks. Still there are "significant restraints" on the economy, Bernanke said in remarks prepared for the House Budget Committee. Read more on Bernanke. Late Monday, he said he didn't expect the economy to dip back into a recession, but the recovery "won't feel terrific." "The market continues to do not much of anything which may be something of a supportive statement in light of yesterday's firmer, somewhat, equity markets and the impetus of Treasury supply," said strategists at CRT Capital Group. On Thursday, the government will sell 30-year bonds (UST30Y 4.16, +0.04, +0.10%) , also a reopening. Bernanke, Beige Book At 2 p.m. Eastern, the Fed's collection of anecdotes about the economy, known as the Beige Book, comes out. The text is used by officials during policy-setting meetings, the next of which is on June 22-23. "Economists believe a more positive tone by the Fed could provide the impetus to push equity prices higher and possibly entice corporate borrowers back into the market" on expectations that investors will be willing to buy debt considered riskier than treasury bonds, said Ken Jaques, credit and derivatives manager at Informa Global Markets. "But they also believe the overwhelming level of the Federal budget deficit could undermine the recovery." "Many economists now believe, given the severity of the debt crisis in Europe and the high rate of unemployment here in this country, that the Fed will not raise rates until sometime next year," Jaques said. So far this month, corporate issuance volume is a third of what it was in the same period last year, according to Informa. On Tuesday, Altria Group Inc. (MO 20.26, +0.06, +0.28%) sold $800 million to meet working capital requirements, refinance debt and for general corporate purposes. Zions Bancorp (ZION 22.76, +0.24, +1.07%) is expected to sell 4100 million in bonds during the session, according to Informa.

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