(Bloomberg) — The Treasuries market pared losses following an auction of 30-year bonds that drew strong demand as investors attracted by high yields shrugged off fiscal concerns.
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Yields came off of session highs Thursday afternoon in New York, with the benchmark 10-year’s about one basis point higher. The $22 billion auction went smoothly, capping off a week of sales that showed strong appetite for US government debt.
“Despite all the handwringing about the US fiscal trajectory, the 10-year and 30-year auctions have gone off without any issue or large market concession,” said Priya Misra, portfolio manager at JP Morgan Investment Management.
Thursday’s auction saw bonds awarded at a yield of 4.889%, nearly matching the pre-auction yield just before the bidding deadline. It followed a strong showing for $39 billion of 10-year notes on Wednesday that sent yields lower.
“Investors showed up for long dated securities this week in good form,” said Tom di Galoma, managing director at Mischler Financial Group. “No one is timid to step up and buy the long dated securities especially when 30-year yields are close to 5%.”
The results come as investors return their focus to fiscal policy. US bond yields have risen since President Donald Trump signed his tax bill into law last week, adding an estimated $3.4 trillion to deficits over the next decade, according to the non-partisan Congressional Budget Office.
What Bloomberg Strategists say:
“…per earlier auctions direct bidders were once again more prominent than usual. Overall, it’s a pretty solid result that should assuage some of the fears of fiscal-led bear steepening, at least in the short term.”
— Cameron Crise, Macro Strategist, Markets Live
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UK government borrowing costs have also increased on fears the government will be forced to sell more bonds to finance spending. In Japan, bond yields surged 20 basis points over the first two days of this week on concerns that politicians will loosen fiscal policy as they court voters ahead of elections. A sale of 20-year debt went off without spectacle earlier Thursday, offering some reassurance.
Initial US jobless claims released Thursday morning fell for a fourth week to 227,000, slightly below the 235,000 expected by economists polled by Bloomberg. Treasuries were little changed after data was released.