Treasury yields rise again, after another weak debt sale

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The Treasury struggled again on Thursday with a big debt sale, paying more than expected to get investors to take $32 billion in seven-year notes.

The notes were sold at a yield of 3.37%, compared with the 3.34% that traders had expected just before the auction.

The weak sale has pushed Treasury yields higher across the board again Thursday, after a steep rise on Wednesday that was fueled in part by a disappointing auction of five-year T-notes.

The 10-year T-note yield, a benchmark for mortgage rates, was at 3.90% at about 11:15 a.m. PDT, the highest since mid-June and up from 3.82% on Wednesday and 3.67% on Tuesday.

In the Treasury bond market, a move of nearly a quarter of a point in two days is momentous. And the market on Thursday didn’t seem to take any solace from Federal Reserve Chairman Ben S. Bernanke’s reiteration that the central bank expected to keep short-term interest rates low “for an extended period.”

The government still has plenty of buyers interested in its debt: It had $83 billion in bids for the seven-year-notes. But those buyers obviously wanted a significantly higher return than they did even a few days ago.

Why the push-back from investors now? Wall Street has plenty of theories: Investors finally are choking on the massive supply of debt the Treasury is issuing to finance the federal deficit; the market is increasingly worried about government bonds in general, given the budget woes facing Greece, Portugal, Spain and other European countries; the U.S.-China trade battle could drive the Chinese away from our bonds; and investors simply are finding other investments, including stocks, corporate bonds and municipal bonds, much more appealing.

-- Tom Petruno

Evan Vucci / Associated Press