TREASURIES-Selling ahead of 10-yr auction gains momentum

* Selling precedes Wednesday’s $21 billion 10-yr auction

* Global stock rebound adds to pressure on bonds

* 10-year yield backs up to support at 2.46 percent

By Emily Flitter

NEW YORK, Oct 13 (BestGrowthStock) – With a global rebound in
stocks halting the strong flow of capital into fixed income,
traders in the U.S. Treasury market found room on Wednesday to
set up for the day’s 10-year auction by selling longer-dated
Treasuries.

Prices of seven-year and 10-year notes and 30-year bonds
fell slightly in robust trading. The Treasury Department is
planning to sell $21 billion in reopened 10-year notes at 1
p.m. (1700 GMT).

The 10-year yield, which had traded as low as 2.36 percent
on Tuesday, had risen to 2.45 percent, a level at which it had
been lodged for several days before data on job losses in
September spurred a Treasury rally late last week.

The 2.45 percent yield is considered significant by
Treasury strategists, and may help draw a bid at the 10-year
auction, but Ian Lyngen, senior government bond strategist at
CRT Capital Group in Stamford, Connecticut, said yields could
go even higher before the sale.

“We do expect a modest backup in rates to aid the auction
process,” he said.

Volume on Wednesday morning was 116 percent of the 10-day
moving average, according to Lyngen.

John Spinello, Treasury bond strategist at Jefferies & Co.
in New York, said his firm had seen no buying overnight and he
did not expect heavy participation by foreign buyers in the
10-year auction.

Still, he said, the 10-year note was at a more appealing
point on the yield curve compared to the 30-year bond.

“If there is any investment money coming into the market
it’s coming into the belly of the curve, not the bond,” he
said.

The 30-year bond (US30YT=RR: ) traded 18/32 lower in price to
yield 3.86 percent, up from 3.81 percent late on Tuesday.

Prices along the Treasury curve are still displaying the
effects of speculation that the Federal Reserve will begin
another program to purchase Treasuries and try to stimulate the
economy. If the Fed does launch such a program, it will likely
buy Treasuries with maturities ranging from five to 10 years.
Traders therefore are willing to bet that middle-dated debt
yields will fall further. But there is no corresponding chance
of a buyer like the Fed suddenly snapping up long bonds.

“From a supply/demand perspective we’re getting constant
bond (auctions) every month but the Fed’s not taking that out,”
Spinello said.

That sentiment was widening the spread between 10-year
yields and 30-year yields on Wednesday. It registered at 140
basis points.

The Treasury will auction $13 billion of reopened 30-year
bonds (US30YT=RR: ) on Thursday.

Three-year notes (US3YT=RR: ) traded 2/32 lower in price to
yield 0.58 percent, up from 0.56 percent late on Tuesday.

The two-year Treasury note’s (US2YT=RR: ) yield, which dipped
to a new record low of 0.34 percent on Tuesday, was 0.37
percent on Wednesday.

Treasury prices also came under pressure amid a global
rebound in stocks. U.S. stock futures pointed higher on
Wednesday.
(Editing by Theodore d’Afflisio)

TREASURIES-Selling ahead of 10-yr auction gains momentum