Prices little changed after 3-year note auction

By Chris Reese

NEW YORK (BestGrowthStock) – Treasury debt prices were little changed on Monday as stocks hovered near the steady mark and neither added much, nor subtracted from, the safe-haven allure of government debt.

Treasuries pared slight gains on Monday afternoon following a somewhat lackluster reception for the sale of $35 billion of three-year Treasury notes, in the first of this week’s $69 billion worth of bond auctions.

“Treasuries were trading firmer ahead of the auction, with stocks under pressure,” said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut, noting that three-year notes built in little in the way of a concession.

“Since the results, Treasuries have moved lower off the highs,” he said.

Analysts are watching the auctions closely since the bond market remains relatively expensive after a three-month rally, which recently pulled benchmark yields below 3.0 percent from more than 4.0 percent at the start of April.

Though bond prices have retreated from their highs as a bit of an equities recovery dimmed the allure of safe-haven government bonds last week, auctions may test the patience of bond bulls who expect low growth and inflation to support debt prices.

“Bonds have a lot of fans and there are signs that there are too many bulls,” said William O’Donnell head of Treasury strategy at RBS Securities in Stamford, Connecticut.

“I still fancy being flat here — we’re still in a primary bull trend — while looking for a dip to supports to reload longs.”

The benchmark 10-year note was trading 2/32 higher in price to yield 3.05 percent, down slightly from 3.06 percent at Friday’s close.

However, it was up from a one-year low of 2.88 percent hit at the start of July when a rally driven by fears over Europe’s fiscal crisis and worries the U.S. recovery was fizzling hit its peak.

Ten-year notes are right above technical support at 3.06 percent, according to O’Donnell. Additional support is at 3.128 percent and the strongest support is around 3.33 percent, he added.

The 30-year long bond was last down 1/32 in price to yield 4.04 percent.

The Treasury will auction $21 billion of reopened 10-year notes on Tuesday and $13 billion of reopened 30-year bonds on Wednesday.

“It’s the 30-year that’s always the big question mark. The 10-year often has support from central banks but as you move out the curve it becomes a question mark as to what demand base will show up to take down that paper,” said Michael Pond, Treasury and inflation-linked strategist at Barclays Capital in New York.

Three-year notes were trading 1/32 lower in price to yield 1.03 percent from 1.02 percent late on Friday.

(Additional reporting by Burton Frierson; Editing by Leslie Adler)

Prices little changed after 3-year note auction