Treasurys hold losses after auction; 30-year sale looms

US 10-YR
US 30-YR

U.S. bonds held on to earlier losses on Wednesday after the Treasury auctioned $24 billion in 10-year notes at a high yield of 2.795 percent. The bid-to-cover ratio, an indicator of demand, was 2.54.

The market is now bracing for the Treasury's auction of $16 billion in 30-year bonds on Thursday.

On Tuesday, yields on U.S. 30-year bonds climbed to a three-week peak, while that of 10-year notes hit a two-week high after the U.S. House of Representatives passed a measure on the U.S. debt ceiling and new Federal Reserve chair Janet Yellen vowed to maintain the bank's current strategy of reducing asset purchases at a gradual pace.

The House approved a one-year extension of federal borrowing authority after Republicans caved in to President Barack Obama's demands to allow a debt-limit increase without conditions.

(Read more: Bad jobs reports won't change tapering: Yellen)

The 221-201 vote was a stark contrast with the confrontational fiscal tactics House Republicans have used over the past three years, resulting in last October's 16-day government shutdown.

"This is a spillover from Yellen. It's also the whole debt-ceiling resolution," said David Coard, head of fixed income sales and trading at Williams Capital Group in New York.

"So overall, there's less uncertainty. I know that the debt-ceiling resolution had a negative effect on the bills, but it had a positive effect on the longer end. So it all came together to see the selloff that we're seeing."

Also on Tuesday, Yellen said it would take a notable change in the U.S. economic outlook—a significant deterioration in the job market, or if inflation does not rise—for the Fed to pause its tapering plan.

Benchmark 10-year Treasurys were last down 9/32 in price to yield 2.76 percent, their strongest level since Jan. 29.

Meanwhile, 30-year bonds fell 19/32 in price to yield 3.72 percent.

—By Reuters

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