Bond prices churn on refunding
Treasurys mixed after a record 30-year auction and as investors monitor the progress of the government's stimulus plan in Congress.
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| Click on the chart to see other government bond prices and yields. |
NEW YORK (CNNMoney.com) -- Government debt prices churned Thursday as investors weighed a week of successful refunding auctions with the progress of the stimulus proposal in Congress.
Treasury completed a record $67 billion quarterly refunding Thursday with a $14 billion 30-year bond sale that matched the record set in February 2006.
The government said nearly $28 billion worth of bids were received for the $14 billion in debt sold.
The bond sale came after well-bid 3-year and 10-year auctions, both of which attracted healthy demand from foreign investors, a key component to the market for U.S. debt.
One reason for the record debt sale is to fund the massive government spending needed to help break the recession. Senate and House negotiators reached agreement on a $789 billion stimulus bill Wednesday.
Even if stimulus is passed, investors have come to realize that it will be awhile before the economy recovers.
"People are trying to decide whether 2009 is the turn around year or whether we are going to have to suffer through it," said Steve Van Order, fixed income strategist at Calvert Funds.
Debt prices: The price of the newly issued 10-year note recovered earlier losses, pulling the yield down to 2.76%, even with late Wednesday. Bond prices and yields move in opposite directions.
The 30-year bond fell 1-2/32 to 118-8/32, and its yield rose to 3.50% from 3.45%, recovering from sharper losses after the auction.
The 2-year note edged up 2/32 to 100 and its yield dipped to 0.89%.
The yield on the 3-month note eased to 0.30% from 0.31% Wednesday. Demand for the shorter-term note has been seen as a gauge for investor confidence.
Lending rates: Bank-to-bank lending rates were unchanged. The 3-month Libor rate was 1.23% Thursday, according to data on Bloomberg.com. The overnight Libor rate, meanwhile, held steady at 0.30%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.
Two credit market gauges were unchanged. The "TED" spread was unchanged at 0.93 percentage point. The bigger the TED spread, the less willing investors are to take risks.
Another market indicator, the Libor-OIS spread, was also steady from the day prior, at 0.96 percentage point. The wider the spread, the less cash is available for lending.
Commercial paper: The Federal Reserve said a key form of business lending contracted for the fifth week in a row. Commercial paper sold in the seven days ended Feb. 11 fell by $31.5 billion, or 2%, to a seasonally adjusted $1.553 trillion.
Commercial paper is short-term debt that big businesses use to pay for day-to-day operations. The Fed's Commercial Paper Funding Facility, started in late October at the height of the cash crunch, allows companies to sell highly rated 3-month debt to the government in exchange for ultra-low interest rates. 
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