Treasurys mixed after Fed
Long-term debt prices pull back after the central bank decides to hold rates steady and does not increase debt buyback program. Shorter-term debt holds steady.
 |
| Click the chart for current bond prices and yields. |
NEW YORK (CNNMoney.com) -- Treasurys were mixed Wednesday after the Federal Reserve held its key lending rate near zero and said that the rate of contraction of the economy has slowed since March.
At its last meeting, the central bank announced that it would buy $300 billion in debt.
Analysts hoped the Fed would increase the debt buyback, a program called quantitative easing.
"It looks like there was a little bit of disappointment that the Fed didn't increase its quantitative easing measures," said Kim Rupert, fixed income analyst at Action Economics.
The Fed is set to purchase an undisclosed amount of Treasurys Thursday after buying $7 billion worth Monday.
Longer maturity debt prices fell hard, but shorter term notes traded in a tight range.
"There is still enough concern in the market with respect to the recession, the swine flu impact, bank stress tests and banks that might need additional capital," said Rupert.
Inflation concerns hit longer-dated debt. The Fed is not concerned about inflation, "but the market has other ideas here," said Rupert.
Earlier, Treasurys got a boost from a weaker-than-expected reading on the nation's economy. Gross domestic product fell at an annual rate of 6.1% in the first quarter, but economists were looking for a 4.7% drop.
Supply remains a concern: "The market is facing a huge supply problem," said Bill Larkin, a fixed-income portfolio manager at Cabot Money Management, adding that supply concerns "have a longer lasting impact than the current economic data."
The Treasury Department announced plans to offer $71 billion worth of 3-,10- and 30-year Treasurys next week. The announcement came on the heels of a $26 billion auction of 7-year notes Wednesday, the last of three auctions this week.
The Treasury said it will add more auctions of 30-year bonds to its calendar, "to address the increase in projected financing needs."
While demand for U.S. debt assets has remained relatively strong, with this week's auction of 5-year notes receiving a 2.22 bid-to-cover ratio and the 7-year auction drawing a bid-to-cover ratio of 2.28, analysts worry that supply will weigh on prices.
Bond prices: The benchmark 10-year note fell 23/32 to 97 1/32, and its yield rose to 3.12% from 3.01% late Tuesday. Bond prices and yields move in opposite directions.
The 30-year bond sank 31/32 to trade at 90 31/32, and its yield jumped to 4.03% from 3.96%.
The 2-year was flat at 99 27/32, and its yield was 0.96%.
The 5-year note rose 6/32 to 99 9/32 and and its yield fell to 2.03%.
The yield on the 3-month note dipped to 0.11% from 0.13%.
Meanwhile, lending rates were mixed. The 3-month Libor fell to 1.03% from 1.04% Tuesday, according to Bloomberg.com. The overnight Libor rose to 0.23% from 0.21%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London. 
-
These 5 cities have the fastest-growing foreclosure rates. And they're not the usual suspects. More -
Now you can get the $8,000 credit through June 2010 -- or $6,500 if you're not a first-time buyer. More -
Home prices are forecast to plummet, but these 7 cities are predicted to post gains. More -
Home prices have grown in the beer-guzzling heartland and fell in the wine-sipping coastal states. More -
Investors think Detroit's foreclosed houses are a deal. Would you buy this one for $6,900? More -
Economic growth, affordable wages -- these spots have what entrepreneurs need to thrive. More
