Bond Report: Treasury yields slightly lower as traders brace for debt auctions

Bond Report: Treasury yields slightly lower as traders brace for debt auctions

Treasury yields fell slightly in early Wednesday trade, staying bound in a tight range, as traders braced for two debt auctions that could give the latest sign of investors’ appetite for government paper.

The 10-year Treasury note yield TMUBMUSD10Y, -0.16%   fell 1.1 basis points to 2.873%, retreating from its two-week high, while the 2-year note yield TMUBMUSD02Y, +0.15%  was unchanged at 2.665%. The 30-year bond rate TMUBMUSD30Y, -0.26%   was down 0.7 basis point to 3.026%, according to Tradeweb data. Bond prices move in the opposite direction of yields.

Investors will also brace for a pair of debt auctions. The Treasury Department will sell $17 billion of 2-year floating rate notes at 11:30 a.m. Eastern and $31 billion of 7-year notes TMUBMUSD07Y, -0.18% at 1 p.m. The 7-year note traded down a basis point to 2.832%. Concerns over a deluge of bond supply from the recent fiscal stimulus measures have abated as domestic investors took down the bulge in issuance with few hiccups.

Analysts suggest month-end buying could ensure bond prices remain well-supported, keeping yield anchored, as money managers scoop up government paper to maintain the average maturity of their portfolios before Friday. When debt rolls off a bond fund portfolio, the average maturity will fall, drifting away from the maturity of their competing benchmark index.

On the data front, traders will grapple with revised second-quarter reading of gross domestic product at 8:30 a.m. Eastern, which could give a more accurate reading of the stellar economic growth in recent months. Soon after, pending home sales will come in at 10 a.m.

The Italian bond market rallied after the newspaper La Stampa reported that Italy may ask the European Central Bank to extend its signature quantitative easing program, which is set to end in December 2018. Market participants say the ECB has propped up the government paper of Italy and other peripheral European economies, the worst hit by the eurozone crisis in 2009. The 10-year Italian government bond yield TMBMKIT-10Y, -0.67%   fell to 3.166% from an intraday peak of 3.200%, according to Tradeweb data.

Read: Investors watch for Italy debt-rating downgrade, amid fears of forced selloff

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