Treasury prices rose Tuesday, pushing yields lower, as a strong debt auction showed investors retained a healthy appetite for government paper.
What’s the bond market doing?
The 10-year Treasury note yield TMUBMUSD10Y, +0.04% fell 2.2 basis points to 2.570%, while the 2-year note yield TMUBMUSD02Y, -0.18% declined 2.7 basis point to 2.364%, its biggest daily decline in nearly four weeks. The 30-year bond yield TMUBMUSD30Y, +0.07% was down 1.3 basis points to 2.982%. Prices for debt move in the opposite direction of yields.
The 10-year Italian government bond yield TMBMKIT-10Y, +0.00% surged 8.5 basis points to 2.678%.
What’s driving the market?
The Treasury Department sold its first batch of paper this week, drawing healthy demand for $40 billion of 2-year notes. It will also sell another $73 billion of debt in 5-year and 7-year notes later on Wednesday and Thursday. Trading in government bonds can be influenced by an influx of fresh bonds as broker-dealers make room for the incoming supply.
European bonds and Italian government debt came under pressure ahead of a ratings review by S&P Global on Friday. The ratings firm has currently given Italy a BBB rating, two notches above junk status, but has issued a negative outlook on the country, a sign that Italy‘s rating may be lowered.
The European Union statistics office reported that Italy’s public debt had risen to 132.2% of its annual output in 2018, from 131.4%.
What did market participants say?
“The market was very well bid,” wrote Thomas Simons, senior money market economist at Jefferies, who described the afternoon auction’s results as “solid.”
He said, however, the rally in stocks and oil could sap appetite for the rest of the bond auctions this week.
What else is on investors’ radar?
New home sales for March jumped 4.5% to run at an annualized pace of 692,000, from 667,000 in February. More important, market participants will keep an eye on the first estimate of first-quarter gross domestic product growth on Friday.
See: Economy stumbled out of the gate in early 2019 but finished stronger, GDP to show
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