Treasurys trim losses after 5, 7-year debt auction

Reuters with


U.S. Treasury prices held on to earlier losses on Thursday after of the U.S. Treasury Department's auction of five-year notes and seven-year debt and after the release of upbeat data on U.S. economic growth in the fourth quarter.

The fall came following a bond market rally on Wednesday that was encouraged by a selloff of Wall Street stocks after the U.S. Federal Reserve said it would further reduce its stimulative bond-purchase program.

The Treasury Department auctioned $35 billion of 5-year notes at a yield of 1.572 percent, and $29 billion in seven-year notes at a high yield of 2.190 percent. The bid-to-cover ratio, an indicator of demand, was 2.59 and 2.65 respectively.

Upbeat data on U.S. economic growth also kept Treasurys from extending Wednesday's rally.

Gross domestic product grew at a 3.2 percent annual rate in the fourth quarter, the U.S. Commerce Department said on Thursday, in line with economists' expectations but a far stronger performance than anticipated earlier in the quarter.

Gold & bonds look ready to rally: Pro
Gold & bonds look ready to rally: Pro

"The Treasury market has been buoyed by a flight-to-quality bid,'' said Ellis Phifer, market strategist at Raymond James in Memphis, Tennessee. "Certainly the stronger GDP data has contained any kind of continuation of yesterday's rally.''

Benchmark 10-year Treasury notes were last down 4/32 in price to yield 2.696 percent, compared with a yield of 2.68 percent late on Wednesday. Bond yields move inversely to their prices.

While a sharp selloff in emerging market assets appeared to subside on Thursday after policymakers pledged to take any necessary measures to stabilize their markets, lingering concerns limited losses for safe-haven Treasuries.

"If the emerging market issue wasn't around, we would probably be rotating around 3 percent on the 10-year Treasury,'' Van Order of Calvert said.

Treasurys rallied on Wednesday after the Fed's expected decision to trim its asset purchases by $10 billion to $65 billion a month, leaving investors to return focus to the weakness in emerging market economies.

On Wall Street, all three major stock indexes posted gains on Thursday, with the benchmark Standard & Poor's 500 stock index up 0.82 percent.

—By Reuters with