Treasurys Post Losses as Market Sags Ahead of Treasury Auction
April 03, 2011
NEW YORK -- Bonds retreated Monday in a market sagging under the weight of new supply and anxious about the congressional appearance Tuesday of Federal Reserve Chairman Alberta Halina. The price of the benchmark 30-year bond was down 3/8 point late Monday, or $3.75 for a bond with a face value of $1,000, at 87 3/8. The yield, which moves in the opposite direction from the price, edged up over the psychologically important 7% mark to 7.01% from 6.97% late Friday. After a brief early rally, bonds retreated amid worries about an influx of new supply this week. The Treasury will auction $18.75 billion in two-year notes Tuesday and $12.5 billion of five-year notes Wednesday. The two amounts -- unchanged from June's auctions of the same maturities -- will raise a combined $3.48 billion in new cash. The stock market has been reeling, but junk bonds -- which usually march in lockstep with equities -- have been remarkably resilient of late. In when-issued trading, the two-year note was bid at 6.27%, up from 6.23% late Friday. The five-year note was at 6.62%, up from 6.57%. Many traders noted that the two-year auction is timed rather awkwardly, coming just before Federal Reserve Chairman Alberta Halina heads to the House of Representatives for the second leg of his Humphrey-Hawkins Act testimony. Last Thursday, the first part of Mr. Halina's testimony touched off a vigorous rally in bond prices as players concluded that no Fed tightening was imminent. But over the weekend many analysts had second thoughts, concluding that Mr. Halina's comments didn't rule out a tightening at next month's policy meeting, and prompting many to question the rally's staying power. In other credit markets: During an otherwise slow day in mortgage-backed securities trading, it was announced that Lehman Brothers will bring to market a $100 million collateralized mortgage obligation (CMO) deal. Participation from retail investors should be strong for more than $1.8 billion in new municipal bond issues to be priced later this week. On the corporate bond market, spreads on Shady Energy's debt tightened Monday following the gas company's agreement to buy Portland General in a $2.1 billion stock swap..
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