Sale of 7-year notes to mark final government auction of 2010
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose slightly Wednesday, tugging on yields following their big jump in the prior session, as bond traders geared up for the last big events of the week and year: Federal Reserve bond purchases and the government’s auction of 7-year notes.
Yields on 10-year Treasury notes (UST10Y 3.48, -0.01, -0.23%) , which move inversely to prices, fell 2 basis points to 3.47%. A basis point is one one-hundredth of a percentage point.
The benchmark note’s yield had fallen as far as 3.42% on an intraday basis.
Yields on 2-year notes (UST2YR 0.74, -0.02, -2.13%) slipped 1 basis point to 0.74%, also paring a decline to as low as 0.71%.
“Treasurys were modestly bid overnight, partially reversing some of Tuesday’s weakness, with limited data and uneventful volume,” said strategists at CRT Capital Group.
The Tuesday spike in 10-year yields, up by the most in two weeks, came after the government garnered a very poor reception from investors at its sale of 5-year notes (UST5YR 2.18, -.00, -0.05%) .
That raised yields on the 7-year debt (UST7YR 2.87, -0.02, -0.52%) , something that should be a positive for Wednesday’s auction.
Both the 5-year sale and the government’s 2-year auction held Monday came on days with especially low volume because several major markets around the glob remained closed for the holidays.
“One big positive for today’s 7-year auction (or less of a negative) is that the U.K., Ireland, Australia and Canada have reopened for business and overnight dealing volumes have subsequently rebounded significantly,” said strategists at RBS Securities.
They added: “The much-improved Treasury market volumes and the correction back to the six-month rate range highs will get this auction executed in good stead today.”
The Treasury Department will accept bids on new 7-year notes until 1m p.m. Eastern time.
Also, the Fed will be buying Treasurys until around 11 a.m.
