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US Treasurys end lower despite strong demand for 2-year government notes at auction

US Treasurys end lower despite strong demand for 2-year government notes at auction

Treasury prices finished lower Wednesday after an auction of new 2-year notes attracted unexpectedly brisk demand but failed to spur the market.
The Treasury Department sold $22 billion in 2-year notes. That amount is higher than usual, but department statistics showed that there was average demand from domestic investors and above-average interest from foreign investors.
"Considering the larger auction size and current trading vacuum, these were not especially poor results," said Action Economics.
Often a successful auction will spark a Treasury rally, but prices continued lower after Wednesday's sale. Dealers cautioned against reading too much into the market action as participation was light the day after Christmas.
The benchmark 10-year Treasury note fell 15/32 to 99 23/32 with a yield of 4.29 percent, up from 4.21 percent late Monday. The market was closed Tuesday for Christmas. Prices and yields move in opposite directions.
The 30-year long bond dropped 1 1/32 to 105 5/32 with a yield of 4.69 percent, up from 4.62 percent late Monday.
The 2-year note lost 5/32 to 99 21/32 with a yield of 3.31 percent, up from 3.26 percent late Monday.
Treasury auction results in recent months have been monitored more carefully than usual because of concerns a waning dollar was causing foreign central banks and other investors to diversify their reserves away from dollar-denominated holdings.
For many years, central banks in Asia, the Middle East and Europe have stocked their reserves with Treasurys, but a number of central bankers in recent months have suggested they are considering the euro and other currencies for their reserves.
So Wednesday's strong foreign interest was reassuring to the market.
It was too early to determine if the disappointing holiday shopping season would affect Treasuries.
Early signs are that the season may be disappointing. That raised concerns that overall consumer spending, long a driver of the economy, may slow as households feel the strains of inflation pressures and a deteriorating housing market. While that is bad news for the economy, it should spur demand for Treasurys, which perform well in times of economic softness.
The International Council of Shopping Centers said that same-store sales, or sales at stores opened at least a year during the November-December period, appear to be coming in just below meager projections. But it said that post-Christmas buying could help boost the total.


Updated : 2021-05-14 12:30 GMT+08:00