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Treasury yields rise again after 30-year bond sale

February 10, 2011 |  2:36 pm

After a one-day respite, Treasury bond yields rebounded Thursday as many investors remained wary of locking in current interest rates in an improving economy.

That won’t be welcome news in the housing market, where the surge in Treasury yields since October has pushed average mortgage rates above 5% for the first time since April.

The Treasury, borrowing to finance the federal deficit, wrapped up this week’s sale of $72 billion in bonds with an offering of $16 billion in 30-year securities Thursday, and investor demand was tepid.

30yrbond The new 30-year bonds were sold at a yield of 4.75%. That was up from the 4.71% market yield on  previously issued 30-year bonds (charted at left) on Wednesday, and close to the 10-month high of 4.77% reached Tuesday.

Among other Treasury issues, the yield on the two-year T-note rose back to 0.84% from 0.80% on Wednesday.

The Treasury attracted relatively few investors to its sale of three-year notes Tuesday, but saw strong demand for the 10-year notes it sold Wednesday. Demand weakened again at the 30-year bond sale.

Some traders said bond yields faced upward pressure Thursday after the Federal Reserve detailed its plans for Treasury purchases over the next month. Total expected purchases were smaller than the market had anticipated.

The Fed in November committed to buying an additional $600 billion of Treasuries through June, an attempt to restrain long-term interest rates and help the economy. But as growth has accelerated in recent months, boosting inflation concerns, investors have demanded ever-higher yields on bonds.

You have to wonder where yields would be if the Fed wasn’t buying.

-- Tom Petruno

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