Bonds fall as Wells Fargo touts profit
Treasury prices ease as investors find a rally on Wall Street enticing enough reason to stick their neck out of the bunker.
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| Click on the chart to see other government bond prices and yields. |
NEW YORK (CNNMoney.com) -- Government debt prices dropped Thursday as stocks rallied on Wells Fargo's first-quarter profit forecast.
The San Francisco-based bank said Thursday that it expects to post a profit of approximately $3 billion for the most recent quarter, surpassing estimates. The news sent the Dow Jones industrial average jumping as much as 200 points as investors hoped that the banking sector might be headed for recovery.
When investors feel more confident about the economy, investors move out of the security of Treasurys. Besides the optimism from Wells Fargo, the Labor Department said the number of people who filed for initial claims in the most recent week fell by 20,000.
"The employment numbers have taken on what amounts to one-sided relevancy of late: nobody seems surprised any more by weak employment results," wrote Kevin Giddis, head of fixed income sales at Morgan Keegan in a research note. "But if claims happen to come in lower than expected, the market can still be counted on to sell off Treasurys on the basis of inflationary fears."
Meanwhile, the market has deal with a torrent of supply. The government has been selling tremendous volumes of debt to fund its numerous stimulus programs.
So far this week, Treasury has sold $152 billion in issues ranging from 4 weeks to 10 years. On Thursday, the government is scheduled to auction $18 billion in 9- year, 10-month notes.
"On the heels of a good ($35 billion) 3-year auction yesterday, the investment community will turn its eyes on the results of the 10-year auction scheduled today," wrote Giddis. "Don't get too spooked out by a sloppier auction that usual, though. My guess is that today's early close might make for less-than-optimal conditions."
The Treasury market closes early Thursday and is closed Friday in observance of Good Friday.
On Wednesday, the government bought $2.97 billion worth of Treasurys as part of its $300 billion buyback plan, out of more than $31 billion worth of debt submitted for auction.
The government is selling its debt at a much more rapid rate than it is buying it back, however. The imbalance has investors concerned about who will continue to purchase such volumes of supply.
Bond prices: The benchmark 10-year bond fell 18/32 to 98-17/32, and its yield rose to 2.93%. Bond prices and yields move in opposite directions.
The 30-year bond sank 1-12/32 to 95-18/32, and its yield rose to 3.75%.
The 2-year note edged lower 2/32 to 99-27/32, and its yield rose to 0.97%.
The 3-month yield rose to 0.19%.
Lending rates: The 3-month Libor rate was 1.13%, according to Bloomberg.com, down slightly from 1.14% the day prior. The overnight Libor rate was 0.26%, even with the day prior.
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 mixed. The TED spread narrowed to 0.94 percentage point from 0.96 percentage point the previous day. The narrower the TED spread, the more willing investors are to take risks.
The Libor-OIS spread narrowed to 0.92 percentage point from 0.93 percentage point late in the day Wednesday. The narrower the spread, the more cash is available for lending. 
