By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices climbed Tuesday after
a strong auction of 5-year notes, sending benchmark yields back
toward their lowest in over a year.
The 10-year Treasury note (10_YEAR) yield, which falls as prices
rise, was down 2.5 basis points on the day at 2.465%. In May, the
benchmark yield touched its lowest point in over a year at
2.438%.
Tuesday's move comes ahead of a surge of U.S. economic news,
including a second-quarter GDP report on Wednesday morning, a
statement from the Federal Reserve's policy committee that
afternoon, and a nonfarm payrolls report on Friday.
European bond yields also fell on Tuesday, with the 10-year
German bund yield dropping 3 basis points to 1.120%, its lowest
ever on a closing basis. The 10-year Spanish bond yield fell 2
basis points to 2.474%. It briefly dipped below comparable U.S.
Treasurys on a nominal basis.
Treasury prices rose despite stocks trading higher.
Here's what's moving the bond market on Tuesday:
* The Case-Shiller 20-city composite index showed decceleration
in the rate of home-price growth. Steven Ricchiuto, chief economist
at Mizuho Securities, wrote: "This downshift in prices reflects the
fact that the housing market has lost its upside momentum despite
the low level of yields."
* Consumer confidence data showed the highest reading since
2007, helping Treasurys cut gains.
* The deteriorating situation between Russia and Ukraine sent
continued tremors across the bond market as Western nations agreed
to tougher sanctions on Russia.
* Shorter-term maturities in the U.S. Treasurys market posted
narrower gains on Monday. Market participants have remained
cautious on the so-called belly-of-the-curve, which could be
sensitive to shifts in the monetary policy outlook, based on big
data releases or the Fed statement this week. That has resulted in
a narrowing of the differential between the 5-year note and 30-year
bond. Read more about what it means.
The 5-year note (5_YEAR) yield was down a basis point at 1.693%.
The 30-year bond (30_YEAR) yield fell 3.5 basis points to 3.237%.
The spread between them was last at 1.53 percentage points, its
smallest since the beginning of 2009 on a closing basis.
Treasurys also got a boost after an auction of $35 billion in
5-year notes, which came in robust, despite investor nervousness
about shorter-term debt. These are the stats from the auction:
* The notes sold at a yield of 1.720%.
* The ratio of bidders to the amount sold was 2.81 times,
compared with 2.80 times in the last six sales.
* Direct bidders, which include domestic money managers, showed
up in force, buying 25.9% of the sale, compared to 13.6% in recent
sales. Indirect bidders, often a proxy for foreign demand, bought
up 48.2% of the sale, versus the recent average of 49%. Combined,
buyers took down a record amount of debt for an auction of 5-year
note, according to Stone & McCarthy Research Associates.
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