NEW YORK (CNNfn) - Treasury bonds fell more than a point Thursday after the government's final securities sale of the week drew weak investor demand.
The Treasury Department's auction of $10 billion in 30-year bonds posted a bid-to-cover ratio of 1.33:1, the lowest in at least 17 years and an indication the agency had a tough time unloading its long-term debt.
The difficultly surprised analysts who reasoned the department's reduction of bonds would spark buying interest.
"One would have argued that the reduction in supply would have made the bidding stronger," said John Lonski, senior economist a Moody's Investors Service.
Just before 3 p.m. ET, the price of the 30-year Treasury bond fell 1-16/32 to 95-29/32. Its yield, which moves inversely to its price, rose to 6.43 percent to from 6.31 percent Wednesday.
The losses, the second in two days, mark a big reversal for the bond, whose price has soared like a dot.com stock since the Treasury last week said the first budget surpluses in a generation will allow it to issue less debt.
But some analysts called this rally overdone, pushing yields too low to attract investors.
"The horrid results of today's 30-year auction clearly show that investors have encountered sticker shock," said Tony Crescenzi, bond strategist at Miller, Tabak & Co.
Moody's Lonski attributed some of the auction's weakness to continued uncertainly following Treasury Secretary Lawrence Summers' comments Wednesday. Summers said a plan to shrink the government's debt supply may include all securities, not just bonds.
The market took this as a reversal of its previous belief that mostly long-term debt will be phased out.
"Nobody really knows what the future holds for this particular security because of the different messages we're getting from the Treasury," Lonski said.
In addition to supply questions, demand concerns also may exist. With the Federal Reserve expected to raise interest rates as the economy strengthens, fixed-income securities, ever sensitive to rising inflation, may be looking less attractive to investors.
That's clearly been the case all week, with the Treasury's auction of $10 billion in 10-year notes Wednesday and $12 billion sale of five-year notes Tuesday drawing little investor enthusiasm.
"The refunding results show that the market's assessment of underlying (economic) fundamentals is that they are still bearish," said Miller Tabak's Crescenzi, who called the 30-year results the worst in at least 17 years. "Therefore, the market's overall downward trend is intact."
Treasurys suffered one of their worst years on record in 1999, when the Fed hiked interest rates three times to cool the economy and pre-empt rising inflation.
Bonds posted little response to the day's only economic indicator, which showed the number of Americans filing for unemployment benefits rose 27,000 to 301,000 in the week ended Feb. 5. While higher than expected, the figures still suggest the labor market remains tight and unemployment remains low.
Dollar rises
The dollar rose against the euro and yen Thursday.
Just before 3 p.m. ET, the euro fell to 98.74 cents from 99.32 cents Wednesday. The regional currency showed little response to news that the Bank of England raised interest rates by a quarter point.
The dollar, meanwhile, rose to 108.89 yen from 108.80 yen Thursday.
After gaining strongly against the major currencies for the past week, the U.S. currency has seen only modest upside versus the major currencies recently.
"The dollar remains within a well-worn range set by positive sentiment due to the relative advantage that the U.S. holds in economic growth prospects over Asia and Europe, and the dampening effect of a unsettled stock market," Alex Beuzelin, market analyst at Ruesch International. 
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