Long-term Treasurys flat ahead of auction

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Long-tern Treasury prices were little changed Wednesday, as the government prepared to sell $21 billion in reopened 10-year notes.

What prices are doing: In midday trading, the benchmark 10-year note was flat at 97-4/32 with a yield of 3.96%. Earlier this week, prices on the 10-year note fell and investors saw a 4% yield -- the first time the note had reached that level since October 2008, the height of the financial crisis.

10yearyield.png
Click the chart for current prices and yields.

Bond prices and yields move in opposite directions, so when prices drop, yields rise.

On Wednesday, the 30-year bond was flat at 96-8/32 with a yield of 4.83%. The 2-year note rose 7/32 to 99-8/32 and yielded 1.11%. The 5-year note rose slightly to 99-2-32 and yielded 2.68%.

What's moving the market: In its latest auction of the week, the Treasury Department is reissuing $21 billion in 10-year notes.

Investors showed strong demand in auctions of the reopened 3-year note and 10-year Treasury Inflation-Protected Securities, or TIPS, earlier this week.

The auctions, which total $82 billion combined, also include a $13 billion reissue of 30-year bonds Thursday.

What analysts are saying: "Investors liked what they saw from the 3-year note auction, but remain very cautious about the sales ahead," Kevin Giddis, managing director of fixed income at Morgan Keegan, said in a report to investors.

While earlier auctions this week were well received, reissued notes tend to be less attractive to foreign central banks than newly issued supply, Giddis said.

He expects Wednesday's auction could swing rates 10 to 15 basis points in either direction.

"We are, once again, at a critical definition point in both the fundamental and technical aspects of the rate cycle," Giddis said. "If you are convinced that the U.S. economy is rebounding and won't see a slip up in the coming months, then each new issue of Treasury debt will weigh heavily on the market, likely pushing rates higher to source demand."

But for investors who are skeptical of the recovery and even anticipate a double-dip recession in the second quarter, "then the recent backup in prices makes today's auction a great spot to enter the market," Giddis said. To top of page

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