(Bloomberg) — U.S. Treasury yields rose after weak demand for a pair of Treasury auctions suggested investors were worried about supply ahead of the next funding quarter.
Most read from Bloomberg
Yields across maturities rose by at least four basis points to reach their highest level in more than two months, after monthly auctions of two- and five-year government bonds both delivered higher-than-expected returns. The yield on the ten-year benchmark rose as much as six basis points to almost 4.3%, the highest level since July 10.
The results indicate possible difficulties at four additional Treasury auctions this week and next. Bond investors are grappling not only with uncertain prospects for further Federal Reserve rate cuts — which would support the value of existing securities — but also with the prospect of larger auctions in the future.
The looming U.S. presidential election is exacerbating these concerns as neither candidate has prioritized reducing the budget deficit, veteran economist Edward Yardeni said on Bloomberg Television on Monday.
The Treasury Department will announce on Wednesday the size of next week’s auctions of three-year, 10-year notes and 30-year bonds, and the likely size of other auctions in the November to January period. While no changes are expected from current levels, increases are considered inevitable next year based on federal budget trends.
To be fair, Monday’s auctions were sensitive to a lack of demand. At $69 billion and $70 billion, respectively, the sales of two- and five-year bonds are the largest of the Treasury’s monthly fixed-rate offerings and are typically held on separate days. This week’s three sales – including a $44 billion seven-year bond on Tuesday – are earlier and more tightly clustered than usual because of the timing of the month-end settlement date.
Most read from Bloomberg Businessweek
©2024 BloombergLP
