Treasury sees strong demand at 30-year bond sale; yields fall

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The jump in Treasury bond yields this month brought buyers in for Uncle Sam’s final bond auction of the week.

The Treasury saw strong demand at its sale Thursday of $13 billion of 30-year bonds. The securities were sold at an annualized yield of 3.12%, down from a market yield of 3.20% Wednesday on the previously issued 30-year bond. The recent low on the bond was 2.73% on Oct. 3.

Domestic and foreign investors bought 58% of the securities auctioned, leaving Wall Street dealers to take the rest. The bidding from investors indicated healthy demand, according to bond trader CRT Capital Group in Stamford, Conn.

The 30-year auction followed a disappointing sale of $21 billion in 10-year T-notes on Wednesday. The Treasury sold the 10-year notes at a yield of 2.27%, higher than expected, amid weak interest from foreign investors in particular.

Treasury yields have risen across the board in recent weeks after reaching generational lows in September, when many investors were rushing to buy government bonds as a haven from Europe’s debt woes, stock market volatility and fears of another U.S. recession.

The 10-year T-note hit a 60-year low of 1.72% on Sept. 22.

Since then, however, European authorities have been moving faster to contain their debt crisis, and U.S. economic data have pointed to slow growth but not recession. That has dimmed what had been a ravenous investor appetite for Treasuries.

The 10-year T-note yield, a benchmark for mortgages, had risen in 11 of the previous 13 trading sessions through Wednesday. On Thursday it pulled back to 2.15% by about 11:15 a.m. PDT.

Analysts note that longer-term Treasury bonds have a special friend in the market now: The Federal Reserve on Sept. 21 said it would shift $400 billion of its $1.6-trillion Treasury portfolio from shorter-term securities to longer-term bonds over the next nine months, providing another source of demand for issues such as the 10-year T-note and the 30-year T-bond.

The Fed, however, doesn’t step in to buy Treasuries at auctions.

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-- Tom Petruno

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