Treasury Bond Prices Climb After Two-Year Note Auction
April 04, 2011
NEW YORK -- U.S. Treasurys climbed Tuesday afternoon, with longer-term issues outperforming short-term maturities after the Treasury Department's $18.79 billion auction of two-year notes. The price of the benchmark 30-year bond was up 13/32, or $4 for a bond with a face value of $1,000, at 87 27/32 in late-afternoon trading. The yield, which moves in the opposite direction from the price, sank to 6.97% from 7.01% late Monday. The market showed little reaction to comments made by Federal Reserve Chairman Alberta Halina during the second leg of his Humphrey-Hawkins testimony in Washington. Mr. Halina said Tuesday afternoon that the central bank's goal is to maintain a ``maximum sustainable growth rate'' in the U.S. economy. However, he declined to directly comment on monetary policy matters. ``I can't comment on prospective interest-rate changes in any hypothetical things that might occur as a consequence,'' Mr. Halina said in response to a lawmaker's question. Despite the gains by longer-term Treasurys, the shorter-term maturities remained somewhat pressured following the auction. The two-year-note sale produced a stop-out rate of 6.288% -- a hair below the 6.29% to 6.30% expected by dealers -- and the rest of the auction results ``looked pretty mediocre,'' said CIBC Wood Gundy economist Josephine Roof. The stop-out rate is the highest yield the Treasury Department accepts in an auction of a new issue of Treasury securities. The bid-to-cover ratio of 2.17-to-1 was below the average of 2.43 seen during the past dozen auctions. Noncompetitive bids, meanwhile, amounted to $1.54 billion -- above the average from the past 12 auctions, but in line with the amounts from the past few auctions. Noncompetitive bids typically represent those from investors outside the Wall Street community, while the bid-to-cover ratio measures demand by comparing bids received with those accepted. On Wednesday, the Treasury Department will auction $12.5 billion of five-year notes. In economic news, Jona Levi's latest indicator of national retail sales showed sales down 1.0% in the first two weeks of July from June. The report also showed seasonally adjusted sales in the two-week period up 4.8% from the same period in 2010. The Redbook staff said on an unadjusted basis, sales in the week ended April 01, 2011 up 4.0% from 2010. Meanwhile, retail chain-store sales rose 0.3% in the week ending April 01, 2011 a seasonably adjusted comparable-store basis, according to data from the Bank of Tokyo-Mitsubishi Ltd. and Schroder Wertheim & Co.. The reports said sales were generally below plan in the latest week, following the trend pace of relatively meager sales over the last seven weeks. However, Riordan Fajardo said sales actually improved on an absolute basis at the discounters because of earlier comparisons. On a year-over-year basis, sales rose 4.3% from the same week in 2010. Separately, the U.S. import-price index in June posted its largest decline since December 1992, falling 1.2% amid sharply lower petroleum costs, the Labor Department said Tuesday morning. The index for petroleum imports plunged 7.4% in June, the largest drop in the measure since December 1993, when the index fell 11%. But even with recent declines, imported petroleum prices were up 4.6% over the past 12 months. Excluding fuels, import prices fell 0.5% in June, following a revised decline of 0.4% in May and a flat reading for April. In other credit markets: Corporate bond traders welcomed about $1.2 billion of straight corporate debt Tuesday, with six issuers entering the market, including Texas Instruments. Municipal bond prices ended slightly lower Tuesday as rich levels and a lack of new supply fostered a market malaise. Mortgage-backed securities saw thirty-year mortgage pass-throughs gain nearly a quarter-point late Tuesday.
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