ABC News - - Jan 20, 2011
AP By JANNA HERRON AP Business Writer Investors pulled out of the Treasury market Thursday after two reports signaled the economy is strengthening. ...Performance Tips
Wall Street Journal - - 10 hours ago
TORONTO (Dow Jones)--Canadian bonds are lower across the yield curve and are underperforming US Treasurys on Friday ...Performance Tips
* 10-yr TIPS auction tails, deepening nominals' selloff
* Jobless claims, home data boost rising growth view
* Petrobras' $6 bln deal leads heavy corporate calendar
* Treasury to announce details on 2Y, 5Y, 7Y debt sales
(Rewrites first paragraph, adds quote, updates prices)
NEW YORK, Jan 20 (Reuters) - U.S. debt prices plunged on
Thursday amid worries that coming Treasury auctions could draw
less demand after a poorly received $13 billion sale of
The sale on Thursday of 10-year Treasury
Inflation-Protected Securities, or TIPS, sent debt prices
further downward, with 10-year notes briefly falling a full
point. Thirty-year bond yields briefly hit a technically
important support level at 4.63 percent, the highest since
"All the primary dealers bought more in the TIPS auction
than they thought they were going to buy and they've got to
hedge their interest rate risk somehow, so they're selling
Treasuries," said Rick Klingman, managing director of Treasury
trading at BNP Paribas in New York.
"They'll have nominal interest rate risk, but they've got
to sell something, and this is what they're doing."
The high yield at the TIPS auction was 1.17 percent,
between 5 and 6 basis points higher than the yield at which
comparable securities were trading simultaneously in the open
market, a sign of weak demand.
As a rule, TIPS performance in the Treasury market has had
an inverse relationship to the performance of nominal
Treasuries. But the Treasury Department has recently increased
the size of its TIPS issuance, so a poor TIPS auction portends
similar troubles for nominal Treasury auctions.
"Looking forward, today's result may have some investors
concerned about the 30 year supply, which is scheduled to be
announced in three weeks," wrote George Goncalves, head of U.S.
rates strategy at Nomura Securities in New York, in a note to
The Treasury Department said on Thursday it would sell a
combined $99 billion in two-year, five-year and seven-year debt
next week. This total is unchanged from December, which
consisted of $35 billion in two-year notes; $35 billion in
five-year debt and $29 billion in seven-year notes. For
details, see [ID:nWALKCE7XN]
RATE-LOCKING TAKES HOLD
Corporate issuance, which has been a factor in the Treasury
market all week, along with stronger stocks and brighter
economic data, contributed to Treasuries' losses for the day.
Companies are expected to issue $20 billion to $25 billion
in debt this week. They are on track to sell more than $75
billion this month, which would be a record in January,
according to IFR, a unit of Thomson Reuters. [USC/]
Brazil's state-oil company Petrobras is to sell $6 billion
worth of bonds, Thursday's largest bond offering.
Dealers lock the yields on the debt they underwrite by
selling Treasuries. After they sell the bonds to investors,
dealers buy Treasuries to unwind these "rate locks."
On the U.S. data front, initial claims for unemployment
benefits fell 37,000 in the last week, nearly double what
analysts had predicted. Home resales in December were stronger
than economists had predicted. [ID:nN20105802]
For a graphic on U.S. jobless claims, see
"The data certainly weighed on the market, and you have a
ton of supply so you usually have a lot of rate-lock selling,"
said Larry Milstein, head of government and agency trading at
R.W. Pressprich & Co. in New York.
U.S. benchmark 10-year Treasury notes US10YT=RR last
traded down 30/32 in price after briefly falling a full point,
to yield 3.46 percent versus Thursday's 3.35 percent.
The 10-year yield breached minor chart support in the 3.38
percent area. If the selloff continues, it could test a major
level at 3.49-3.50 percent, which is the upper end of its
trading range since mid-December.
The 30-year bond US30YT=RR shed 1-8/32 points in price to
yield 4.62 percent, a level identified by technical analysts as
a support point, which means the 30-year yield is likely to go
even higher in the near future. The seven-year note US7YT=RR
was the day's worst performer, its yield up 9 basis points.
(Additional reporting by Richard Leong; Editing by Kenneth