NEW YORK (MarketWatch) — Treasury prices gained on Thursday after a strong auction of $13 billion in inflation-protected securities and a mixed round of economic data.
The benchmark 10-year note (10_YEAR) yield, which rises as prices fall, traded down 1.5 basis point on the day at 2.789%, after climbing as high as 2.841% in morning trade.
The 5-year note (5_YEAR) yield fell 1 basis point to 1.370%, and the 30-year bond (30_YEAR) yield traded down 2.5 basis points at 3.890%.
Enlarge Image Ten-year Treasury inflation-protected securities, or TIPS, yielded 0.574%, down about 3 basis points on the day, after a sale of the debt, according to Tradeweb. TIPS, unlike nominal Treasurys, protect against inflation by increasing principal alongside rising costs, though the sector has underperformed this year as inflation remains muted.
However, the auction saw strong demand Thursday, with the debt selling at 0.560%, well below where the broader market was trading at the time. The ratio of bids to the amount of debt sold was 2.59 times, higher than the average of 2.55 times in the last six sales. Direct bidders, which include domestic money managers, purchased a relatively large share of the debt, taking down 21.5% of the notes, compared to a recent average of 8.1%. Indirect bidders, including foreign central banks that often buy real yields, took down another 46.7%, compared to the recent average of 53.5%.
The recent move higher in TIPS yields helped set up the auction for a strong result, according to Gemma Wright-Casparius, senior portfolio manager at Vanguard Inflation Protected Securities Funds. "Forward real yields have normalized toward pre-crisis levels. Much of that has to do with the positive slope of the yield curve," she said.
Nomura Securities gave the auction a grade of A+.
Treasurys had bounced around in morning trading as mixed economic data were released. Weekly jobless claims, a gauge of people applying for unemployment benefits, dropped by the most in nearly three months, beating Wall Street expectations. Claims fell by 21,000 to a seasonally adjusted rate of 323,000 last week. However, the Philadelphia Fed's manufacturing index slowed to 6.5 in November from 19.8 in October, missing economists' expectations of 14.5.
Treasurys weakened after the report on jobless claims but recovered after the Philly Fed data. Investors also digested the Markit manufacturing PMI index, which rose to 54.3 in November from 51.8 in October, as well as a 0.2% drop in wholesale prices.
Click to Play
China's baby bump to open investment opportunities The rising middle class in China is welcoming the government's easing of the one-child policy. Shao Yu of Oriental Securities tells the WSJ's Wei Gu what sectors of the economy will get a boost from the potential baby boomlet.
The yield differential between shorter-term and longer-term Treasurys has widened in recent days in what's known as a steepening yield curve. The gap between the 5-year note yield and the 10-year note yield hit its highest level in over two years on Wednesday at 1.43 percentage points, although it retreated from those highs Thursday, according to Tradeweb.
The yield curve steepened Wednesday after minutes from the Federal Open Market Committee's meeting in October disclosed discussion among Fed officials about how to shift the market's focus from its asset purchase program to short-term rates, which are likely to remain low well into the future. "The markets were setting up for thinking that [the Fed] will start tapering sooner, but they'll push out the guidance as low and long as possible to pull the markets back from the ledge," said Michael Collins, senior investment officer at Prudential Fixed Income.
No comments:
Post a Comment