MW: Treasurys edge up ahead of first debt auction of week
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices gained modestly on Monday, pushing yields lower, ahead of the government's sale of 30-year inflation-indexed securities, the first major auction of the week.
Yields on 2-year notes (UST2YR 0.49, -.00, -0.81%) fell 1 basis point to 0.48%, close to the lowest level on record. Bond yields move inversely to prices and a basis point is 0.01%.
Yields on 10-year notes (UST10Y 2.63, +0.01, +0.34%) were little changed at 2.62%, after being slightly higher in early trading.
Yields on 30-year bonds (UST30Y 3.69, +0.02, +0.66%) rose 1 basis point to 3.67%.
Benchmark 10-year notes have rallied strongly for the past four weeks, pushing yields down from 2.99% to the lowest levels seen since March 2009.
"In the very near term, there is limited upside for Treasurys" maturing in 10 years or less, said strategists at Nomura Securities.
Last week, surprisingly weak economic data spurred the rally in bonds, while stocks fell as investors sought the relative safety of government debt. See Friday's report on bond rally.
Until 1 p.m. Eastern time, the Treasury Department will accept bids on $7 billion of Treasury Inflation protected Securities, known as TIPS. See recent bond auction results.
The sale is a reopening of February's sale of 30-year TIPS, meaning the securities will carry the same coupon and mature on the same date as the original securities. February's sale was the first for the longest-dated TIPS the U.S. sells.
TIPS pay investors a coupon plus the rate of inflation as determined by the government's consumer price index. The gap in yields between TIPS and regular Treasurys of a similar maturity reflects what investors anticipate the CPI will average over the life of the bond.
The break-even rate between 30-year TIPS and regular Treasurys shrunk to 1.92% on Friday, falling about 14 basis points from the previous week, according to Barclays Capital.
Gains may be limited as traders gear up for the remaining short-term note auctions this week. Traders tend to try to push prices lower ahead of an auction to get a better deal on the new securities.
