By Daniel Kruger
U.S. government-bond prices fell Wednesday after the Treasury conducted the second of three auctions of longer-term debt this week.
The yield on the benchmark 10-year Treasury note rose the most in two weeks, settling at 1.585% compared with 1.532% Tuesday.
Yields, which rise when bond prices decline, climbed after a group of investors known as "indirect bidders" won a below-average share of the $24 billion of 10-year notes at Wednesday's auction. The below-average purchases by those investors, whose largest constituent is U.S. fund investors, surprised some analysts because the cohort has been the largest buyer of the bonds at auctions this year.
The weak demand from investors, who bought about 70% of the offering, led bond dealers to buy a larger-than-average amount. Treasury securities often fall in price when dealers win larger shares at the auctions. That is because banks and securities firms typically sell the bonds later on, adding to pressure for prices to fall.
Demand may have been reduced because the 10-year notes were auctioned at their lowest yield in about three years. The Treasury is scheduled to auction $16 billion of 30-year bonds Thursday.
The soft demand was unexpected because the safety of government securities has been attractive amid signs that a slowdown in economic growth around the world is taking root in the U.S.
While the unemployment rate fell last month to its lowest in almost 50 years, the pace of job gains has slowed this year. There are also signs that activity in both the manufacturing and services sectors is decelerating due to persistent trade tensions. Some investors have said they expect Treasury yields to fall to new record lows should economic output continue to slow.
The Federal Reserve has cut interest rates twice this year to help sustain the pace of growth against the risk that a reduction in global trade will lead to slower growth in the U.S. Investors widely expect that the Fed will cut rates for a third time at its meeting later this month.
"The factors that have driven yields to these levels have not gone away, but rather have only intensified," said Benjamin Jeffrey, an interest-rates strategist at BMO Capital Markets.
The WSJ Dollar Index rose less than 0.1% to a recent 91.95 after advancing against the Japanese yen and the British pound, while slipping against the euro.
Write to Daniel Kruger at Daniel.Kruger@wsj.com
(END) Dow Jones Newswires
October 09, 2019 16:52 ET (20:52 GMT)
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