Treasury prices recover after 30-year sale

AP News
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Posted: Nov 12, 2009 6:15 PM

Long-term treasury prices finished Thursday moderately higher, recovering from a drop immediately following an auction of 30-year bonds. Prices for short-term Treasurys edged higher throughout the day.

Tom Porcelli, a market economist at RBC Capital markets, said results for the government's sale of $16 billion in 30-year bonds came in as expected. Investors bracing for weak demand avoided buying up the new debt, which in turn led to low actual demand, he said.

"In a lot of ways, it was a self-fulfilling prophecy," Porcelli said.

After an initial sell-off on the weak results, investors bought into the market, driving prices back to where they were before the details of the sale were announced Thursday afternoon.

The bid-to-cover ratio, which measures demand, was 2.26, compared with 2.37 and 2.92 at auctions in the previous two months for bonds with a similar maturity.

In late trading, the price of the 30-year bond rose 11/32 to 101 24/32, pushing its yield down to 4.39 percent from 4.41 percent late Tuesday. The Treasury bond market was closed Wednesday to observe the Veterans' Day holiday.

The price had fallen as low as 100 10/32 earlier in the session.

Investors who sat out the auction were able to get 30-year bonds at a better price right after the debt sale, Porcelli said.

In other trading, the 10-year note, considered a benchmark for many consumer loans, rose 2/32 to 99 12/32. Its yield dipped to 3.45 percent from 3.48 percent.

The two-year note rose 1/32 to 100 11/32, while its yield fell to 0.82 percent from 0.84 percent.

The yield on the three-month T-bill was unchanged at 0.06 percent. Its discount rate was also 0.06 percent.

The cost of borrowing between banks was unchanged. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ held steady at 0.2725 percent.