U.S. Treasuries slip as latest debt auction flops
Wed Dec 29, 2004 04:29 PM ET
(Updates prices, adds details)
NEW YORK, Dec 29 (Reuters) - U.S. Treasury debt prices slipped on Wednesday after an auction of $24 billion in new two-year notes drew only scant demand in a holiday-thinned market.
Particularly troubling was the lack of interest from indirect bidders, which include foreign central banks. They picked up just $7.90 billion, or 33 percent, of the whole issue, down from the 42.0 percent taken in the November auction.
That was lowest showing for a two-year auction this year, saddling primary dealers with a bulky $15.23 billion worth of short-term debt.
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The new notes went at a high yield of 3.12 percent, the highest at such a sale since May 2002. The auction drew bids for 2.20 times the amount on offer, well short of November's lofty 2.61 and the 2.25 year-to-date average.
The benchmark 10-year note (US10YT=RR: Quote, Profile, Research) was off 5/32 in price, lifting its yield to 4.32 percent from 4.30 percent late on Tuesday. Yields on the current two-year note (US2YT=RR: Quote, Profile, Research) rose to 3.10 percent from 3.08 percent.
"These are the lows of the year," noted one trader at a U.S. primary dealer.
Economic data on Wednesday had little impact on the market. Sales of existing homes rose 2.7 percent in November, stronger than economists had anticipated, but the data did little to stir the market.
The release of the Weekly Mortgage Market Index, which showed a decline for the week ended Dec. 24, also had no market impact.
Five-year notes (US5YT=RR: Quote, Profile, Research) were down 4/32, yielding 3.68 percent, versus 3.65 percent late Tuesday. Thirty-year debt (US30YT=RR: Quote, Profile, Research) yielded 4.93 percent, up from 4.91 percent late Tuesday.
At the margins, a second day of gains in the oil market was potentially supportive of Treasuries, since higher energy costs are seen as a potential tax on consumer spending and therefore a restraint on economic growth.
Looking ahead, bond traders who were not on vacation were keenly awaiting Thursday's release of the Chicago purchasing managers' manufacturing index. Forecasters expect a dip in activity during December, but to still-healthy levels. |
