U.S. Treasuries pared early losses but remained lower in quiet trade Thursday ahead of the final round of auctions for the week and amid added corporate supply following a mixed run of data. The market remains fixated on the directional bent in stocks while awaiting the 30-year auction and next week’s Federal Reserve policy statement.
The 30-year has led lower, recently treading near 2.97% after dropping to a high yield/low price at 2.9915%, from a 2.97% close Tuesday. The 10-year is holding near 2.215% after running between 2.19% and an early 2.23% low versus a 2.183% close. The five-year has been between 1.53% and 1.54% from a 1.517% settlement. The two-year has outperformed but has also stalled, sitting near unchanged at 0.741%
The curve trade has continued along a steepening slope with the gap between the two- and 10-year yields widened to just over 1.47 plus versus 1.44 Wednesday while the yield differential between the five- and 30-years has pushed out to 1.44 from a close under 1.43.
The session’s key event is the $13 billion reopened 30-year auction. Participants are leaning positive on the sale, despite the “ugly” offering in August. The previous sale “tailed” badly as buyers required a significantly higher than expected yield payout to own the issue and foreign interest was flat. A run of corporate debt issuance is also crowding the sale.
Traders note there is some safe-haven support keeping a lid on selling as the market continues to worry over Chinese growth but the Fed “Should They Stay or Should They Go” remains the key discussion. There is talk that there may be little new to come out of the September 16 – 17 meeting.
The Wall Street Journal’s Fed-whisperer, Jon Hilsenrath, wrote Wednesday that the policy posse remains on the fence on a Sept. rate-hike liftoff, despite assertions from some to that it is time to pull the trigger. Recent data surrounding the inflation scenario and the continuing cratering of commodity prices have added the the no-go camp’s argument.
A run of mixed data showed trade prices tumbled harder than consensus alongside the expected drop in jobless claims and disappointing wholesale inventories.
Treasury will announce details on Monday’s three- and six-month bill auctions along with Tuesday’s 52-week sale and next Thursday’s 10-year Treasury Inflation Protected (TIPS) notes at 11 a.m. The $13 billion reopened 30-year bonds will be auctioned at 1 p.m.