A slew of factors weighed on Treasury prices today, lifting yields by five to 10 basis points.
There was no major economic or
Fed news; rather, Treasuries reacted chiefly to weakness in the German government bond market, the outcome of the
meeting in Vienna and the announcement of a government bond sale that will compete with Treasuries.
The benchmark 10-year Treasury note ended down 21/32 at 102 26/32, lifting its yield 8.8 basis points to 6.111%. Shorter-maturity issues outperformed. The two-year note, for example, fell 3/32 to 100 7/32, lifting its yield 4.3 basis points to 6.496%.
The 30-year bond lost 29/32 to 103 31/32, lifting its yield 6.2 basis points to 5.965%. And at the
Chicago Board of Trade
, the September
Treasury futures contract fell 22/32 to 96 20/32.
A big selloff in the German government bond market after the release of a report showing an acceleration in German inflation was the chief catalyst for the selloff in Treasuries, market analysts said. The yield on the benchmark 10-year German government bond rose to 5.198% from 5.094% today, encouraging selling of Treasuries in order to buy the higher-yielding German issues by investors who buy both asset classes.
Other causes of the early weakness included the
announcement of the details of tomorrow's buyback. The department said it would buy back up to $2 billion of bonds maturing between February 2015 and August 2019.
The Treasury Department is using the federal surplus to pay down debt by buying back long-maturity Treasury securities from dealers. Normally, this is positive for long-maturity Treasuries, since the shrinking supply gives them scarcity value.
Today's selloff was in some measure a buy-the-rumor-sell-the-fact phenomenon,
Treasury market analyst Roseanne Briggen said. Yesterday, long-dated Treasuries rose in anticipation of the buyback announcement. Today, they fell.
In addition, it seems some Treasury market participants sold on the news because they were hoping for a larger buyback. A trader at a primary dealer firm said some people were expecting a $3 billion operation.
An article in today's
Wall Street Journal
also pressured Treasuries today, the trader said. The article said the
Federal Open Market Committee, while unlikely to hike the
fed funds rate again at its meeting on June 27-28, may not signal that it is done raising rates for months.
Alan Greenspan gave Congressional
testimony today, but had no comment on monetary policy.
The market weakened further in the afternoon, as OPEC announced a deal to increase production by a smaller amount than is deemed necessary to lead to a significant drop in prices. Also, the
Tennesssee Valley Authority
, a federal agency whose triple-A rated debt is an alternative to Treasuries for some investors, announced that it would sell $1 billion of 30-year bonds this week. The TVA announcement was "the straw that broke the camel's back," MCM's Briggen said.
OPEC reached an agreement to boost production by 708,000 barrels a day. Oil analysts have said that an increase of a million barrels a day is needed to bring about a meaningful decline in prices.
Mortgage Applications Survey
detected slight declines in both refinancing and new mortgage activity. The Refinancing Index fell to 329.3 from 329.4, while the Purchase Index fell to 305.7 from 309.5.
Currency and Commodities
The dollar fell against the yen and gained against the euro. It lately was worth 105.54 yen, down from 105.57. The euro was worth $0.9450, down from $0.9542. For more on currencies, please take a look at
Crude oil for August delivery at the
New York Mercantile Exchange
rose to $31.37 a barrel from $30.65.
Bridge Commodity Research Bureau Index
fell to 223.84 from 224.32.
Gold for August delivery at the
was unchanged at $288.10 an ounce.