U.S. Treasury yields extended their climb on Thursday after a key auction for government paper struggled to draw appetite from bond investors amid signs that U.S.-China trade tensions may be easing.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, +2.55%[1] climbed 5.7 basis points to 1.525%, while the 2-year note rate TMUBMUSD02Y, +1.86%[2] was up 2.8 basis points to 1.532%. The 30-year bond yield TMUBMUSD30Y, +2.87%[3] rose 6 basis points to 1.999%. bond prices move in the opposite direction of yields.
What’s driving Treasurys?
A subdued showing for the 7-year note auction also added to the bearish trading for the Treasurys market. Market participants have commented at the historic lows that bond yields have carved out, making them more expensive than ever for investors.
The auction’s bid to cover ratio, or the proportion of bids accepted to bids received for the debt available on sale, was its lowest since 2009.
See: Treasurys are ‘frickin’ expensive,’ says billionaire quant investor[4]
The bond-market came under pressure in the morning after China’s Ministry of Commerce spokesperson Gao Feng [5]said both the U.S. and China were talking to one another, and that Beijing wouldn’t immediately retaliate against President Donald Trump’s latest round of tariff increases.
Rising hopes for an easing of trade tensions lifted stocks and weighed on demand for bonds. The S&P 500 index SPX, +1.40%[6] and the Dow Jones Industrial Average DJIA, +1.38%[7] were on track for robust gains on Thursday.
Treasury Secretary Steven Mnuchin said in an interview with Bloomberg News that the U.S. was deliberating whether to issue ultralong bond with maturities beyond 30 years. Analysts say the Treasury Department may want to take advantage of the depressed interest rate environment to lock in low borrowing costs for a long period.
The prospect of ultralong maturities could erode demand for existing long-dated debt.
Read: Mnuchin says U.S. weighs ultralong bond issuance, no plans ‘at this time’ to intervene in dollar[8]
In economic data, the revision of the U.S.’s second-quarter gross domestic product [9]showed the economy grew at a pace of 2%. This steady growth...