Treasurys mixed after 30-year bond sale
U.S. auction of 30-year bonds met with lackluster demand. Shorter-term bonds rise as Wall Street rally cools.
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NEW YORK (CNNMoney.com) -- Treasurys were mixed Thursday, with the 10-year note edging lower following a $16 billion auction of 30-year bonds that was met with lackluster demand.
The Treasury Department said it received bids totaling $36.1 billion for the $16 billion in 30-year bonds sold Thursday.
That made for a bid-to-cover ratio of 2.26, which was not as strong as the earlier 2009 average of 2.43. The current average is now 2.41.
Investors sold the 30-year bond following the auction, triggering its yield to rise to the highest level since August. Once the market cheapened and became more attractive, investors purchased the 30-year bond in a technical trade rally.
The sale was the last of this week's $81 billion record refunding that included sales of 2-year and 10-year notes, both of which were met with strong demand.
"Longer-dated securities have an embedded risk with the inflation policies coming out of the Treasury and the Federal Reserve," said Bill Larkin, portfolio manager at Cabot Money Management. "If the bid-to-cover ratio goes lower, the Treasury will have difficulty in pushing through its funding needs."
When the economy is in flux, as it seems to be now, Treasury auctions are usually met with robust demand, Larkin said. When signs of recovery become clearer, he added, investors tend to eye riskier assets, including stocks, which don't require them to tie their money up for long periods of time at low yields.
"The auctions over the last six months have been very, very good. So I'm worried that when we get a moderate auction in shorter-dated securities, that will make people even more nervous about longer-dated Treasurys," he said.
Bond prices. The benchmark 10-year note fell 1-26/32 to 99-9/32 and its yield was up 3.45% from 3.42% late Tuesday. The Treasury Department was closed Wednesday for the Veterans Day holiday. Prices and yields move in opposite directions.
The 30-year bond edged up 10/32 to 101-24/32. Its yield fell to 4.40%.
A softer stock market boosted short-term notes.
The 2-year note moved up 2/32 to 100-12/32, with a yield of 0.82%.
The yield on the 3-month bill was 0.07%. 
