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The record $16 billion sale of U.S. 30-year government bonds got a cool reception from investors Thursday, sparking a selloff in the Treasury debt market.
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Investors' reticence at the last leg of this week's $81 billion federal debt refunding was a surprise after they gave a warm response at the three-year and 10-year note auctions earlier this week.
"Poorly received," Lou Brien, market strategist with DRW Trading in Chicago, said of the latest auction.
Overall bidding for the new 30-year bonds was the lowest since May, while the yield cleared at 4.469 percent, more than 3.5 basis points higher than traders had expected.
Moreover, indirect bidders, which include foreign central banks, came in at 44 percent, slightly below the recent average, according to analysts.
The weak auction results triggered selling of 30-year Treasurys in the open market. The 30-year bond briefly lost more than a point, sending the yield to a session high of 4.48 percent, a level not seen since mid-August.
Benchmark 10-year notes fell 6/32 to yield 3.48 percent, up from Wednesday's 3.45 percent.
Despite the disappointing 30-year auction, analysts handed out a good grade for the November refunding.
It raised roughly $43 billion in new cash to help the U.S. government pay for its stimulus program and financial bailouts.
The Treasury has faced a drop in tax receipts due to the recession.
"Overall it was a decent affair. There were no significant cracks with the paper subscribed," said George Goncalves, head of fixed income rates strategy at Cantor Fitzgerald in New York.
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