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Treasury Department auctions $29 billion of 7-year notes at a high yield of 2.045%

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US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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U.S. Treasurys rallied on Thursday and 30-year bond yields fell to their lowest in over a year as concerns over tensions in Ukraine sparked safety buying, and as European government yields continued to hit record lows.

The Treasury Department auctioned $29 billion in seven-year notes at a high yield of 2.045 percent. The bid-to-cover ratio, an indicator of demand, was 2.57, versus a recent average of 2.56 percent, the lowest yield since May.

Indirect bidders, which include major central banks, were awarded 48.8 percent, compared to a 43 percent recent average. Direct bidders were awarded 20.4 percent, modestly below a recent average of 21 percent.

Benchmark 10-year Treasury notes were last up 6/32 in price with the yield at 2.33 percent. Meanwhile, thirty-year bond rose 17/32 in price, bringing the yield to 3.07 percent.

Yields rose slightly and very briefly after data showed that the U.S. economy rebounded more strongly than initially thought in the second quarter.

The annualized reading for GDP growth between April and June showed an expansion at a 4.2 annual rate instead of the previously reported 4.0 percent pace, the fastest since the third quarter of 2013, the Commerce Department said.

In geopolitical news, Ukraine accused Russia on Thursday of bringing troops into the southeast of the country in support of pro-Moscow separatist rebels. The move throws a spanner in the peace process, after the leaders of the two nations met in Minsk this week and agreed to de-escalate tensions.

Expectations that the European Central Bank is likely to start a bond purchase program when it meets next week have also driven a strong rally in German government debt, which in turn has led Treasury yields lower.

"It's all about Europe,'' said Ira Jersey, an interest rate strategist at Credit Suisse in New York. "At the moment Treasurys seem to be at the whim of bunds.''

—By CNBC.com with Reuters