US Treasuries Rise before Notes Sale

From the lowest level experienced in 2013, Treasury 10-year yields increased before the US is set to sell $35 billion of 2-year debt. In this week, 3 note auctions are scheduled to take place totaling $99 billion. The benchmark yields went down earlier as well as reports showed that the manufacturing industry of China is expanding at a slower pace. Apart from that, the output from the Euro-area contracted for the 15th straight month in April as well. Yields sort of pared the losses as purchases of new homes in US increased in March, thereby capping the best quarter for this industry in the last 5 years. The European stocks rallied the most in last 8 months under speculation that the European Central Bank will be boosting the monetary accommodation. For the 3rd straight day, US equities gained as well.

According to the Departmental Head of Global Inflation Lined Research at the Barclays, Michael Pond, equities are already higher on today and hence, it will not be proper to say that the market’s view on the global growth has seen a significant deterioration. The 10-year benchmark US yields were more or less unchanged at 1.70%. At one point of time, it reached to 1.64%, marking its lowest level since 12th December. The price for the 2% notes which are due on February, 2023 is currently at 102. On yesterday, the 10-year yields were at a value of 1.73%, which is lower than the 200-day moving average of that of 1.75%. Incidentally, the average acts as an indicator of the momentum. The benchmark gauge of US stocks, the Standard & Poor’s 500 Index went ahead by 1%, whereas, the MSCI All-Country World Index gained 1.2%.

At the pre-auction trading, the 2-year notes which were scheduled for sale on today yielded 0.23%. On 26th March, the previous 2-year auction was held and the same drew bids for 3.27 times of the amount of securities available, the lowest figure of the same since July, 2011. According to the Head of US Government Bond Strategy at the CRT Capital Group LLC, David Ader, if level wise considerations are made, the 2-year notes look pretty rich at this point of time. He added that because of the levels, the auction could tail a little. Incidentally, tail denotes amount of yield in excess of where security traded before auction.