By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices climbed Wednesday
after a report showed weak growth in new home sales and an auction
of 5-year notes saw tepid demand.
The 10-year note (10_YEAR) yield, which falls as prices rise,
was down 4 basis points on the day at 2.688%. The 30-year bond
(30_YEAR) yield dropped 3.5 basis points to 3.469% and the 5-year
note (5_YEAR) yield fell 3 basis points to 1.714%.
A Commerce Department report showed a 14.5% plunge in sales of
new single-family homes in March. The seasonally adjusted annual
rate of 384,000 sales last month was the lowest since last July,
missing economist expectations of a 450,000 reading.
"That fall is in contrast to some of the data we have gotten
from other parts of the economy in the last couple of weeks, which
suggested the economy had a significant rebound," said Jake Lowery,
global rates portfolio manager at ING U.S. Investment
Management.
Markit's flash PMI index for the U.S. also dropped slightly to
55.4 in April from 55.5 in March. Readings over 50 indicate growth,
data showed.
The Treasury market has been looking for confirmation that
economic data will rebound as the weather warms after a cold winter
in much of the U.S., which was blamed for a slowdown in growth in
the first few months of the year. The Federal Reserve says the
trajectory of its key lending rate, now anchored near zero, depends
on the pace of economic improvement.
The Treasury Department offered $35 billion in 5-year notes on
Wednesday, which auctioned at a yield of 1.732%, slightly higher
than where the broader market was trading at the time. The sale is
the second in a trio of auctions this week, following a soft 2-year
note auction on Tuesday. Intermediate sector yields, which are
sensitive to speculation about when the Fed will hike its key
lending rate, have been hard hit in recent months.
Bidders offered to buy 2.79 times the amount of debt for sale,
compared with an average of 2.71 times during the past six sales.
Non-dealers took down a sizeable portion of the debt. Direct
bidders, which often includes domestic money managers, bought 18.6%
of the sale, versus 12.9% in recent auctions. Indirect bidders, a
group that often serves as a proxy for foreign central banks, took
down 44.9%, compared with a recent average of 44.5%.
"The buyside takedown figures were decent, but the auction still
tailed 0.6 basis points at 1.732%," said John Canavan, bond market
analyst at Stone & McCarthy Research Associates, in a note.
The market was also bolstered earlier Wednesday by rising
tensions in Ukraine. Kiev accused a Russian group of torturing and
killing two people, and heard calls to start a military crackdown
on activists. Meanwhile, the American sent troops for maneuvers in
Eastern Europe amid a visit to Ukraine by U.S. Vice President
Joseph Biden.
William O'Donnell, head Treasury strategist at RBS, wrote in a
note to clients: "Ukraine tensions have resurfaced after Ukraine's
government said that the 'Easter truce is over' with the U.S.
moving troops into Eastern Europe."
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