Treasurys Hold Losses After Mixed 30-Year Auction

U.S. Treasurys hung onto losses Thursday after an $11 billion auction of 30-year bonds recorded mixed results.

Auctions of 10-year and 30-year bonds have been the source of increasing concern by fixed income investors since questions over the longevity of the United States' prized AAA credit rating emerged back in May.

Treasury's reopening of previously issued 30-year bonds attracted average demand overall, reflected in the bid-to-cover ratio of 2.36. Foreign and institutional interest appeared robust measured by the indirect bidding category, but yields came in above market expectations.

The 30-year Treasury bond was last trading down 1-16/32 in price, yielding 4.28 percent versus 4.19 percent at Wednesday's close. Before the auction, long bonds were down 51/32.

Data fanning hopes of labor market stability also exerted downward pressure on bond prices, and there was profit-taking following gains on Wednesday, when Treasurys rallied in response to a robust 10-year note sale, analysts said.

The 30-year bond auction was the last of this week's long-dated supply of $73 billion.

The price on benchmark 10-year Treasury notes was down 21/32 at 97-25/32 after rising more than 1 point Wednesday. Their yield, which moves inversely to the price, was 3.38 percent, compared with late Wednesday's 3.31 percent, a seven-week low.

U.S. stocks were slightly higher by mid-afternoon.

Investors received a bit of an antidote on the labor front Thursday following last week's disappointing payrolls data.

That report rekindled fears of a protracted recession and likelihood the government will borrow more to stimulate growth.

The U.S. Labor Department reported 565,000 U.S. workers filed for initial unemployment benefits last week, the fewest since January. This was well below the 605,000 forecast by analysts polled by Reuters and the previous week's 617,000.

However, the number of people who continued to collect jobless aid after an initial week of benefits hit a record 6.883 million in the week to June 27, signaling the employment picture remains bleak.

"This an indication of slowing labor deterioration, but the concerns remains with the record continued claims," said Jefferies' Spinello.

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