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US yields jump on Greece hopes, weak JGB sale

U.S. Markets Overview: Treasurys chart

U.S. Treasurys yields rose on Tuesday as hopes Greece could strike a new debt deal and poor demand at a Japanese government debt sale spurred broad selling in high-rated government bonds.

Benchmark yields were on track for their biggest one-day jump in 2013.

On Monday, Greece's new government dropped calls for a write-off of its foreign debt and proposed ending a standoff with its official creditors by swapping the debt for growth-linked bonds.

Meanwhile, Japan's Ministry of Finance sold 2.4 trillion yen 10-year JGBs to unexpectedly weak demand, pushing the spread between lowest and average bid prices to its widest in nearly 12 years.

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Competition from corporate bond supply has reduced appetite for lower-yielding U.S. government debt, analysts said. Bond dealers expected $25 billion in company debt this week, according to IFR, a unit of Thomson Reuters.

"All these things are putting Treasuries on the back foot," said Mike Lorizio, head of Treasuries trading at John Hancock Asset Management in Boston.

The bond market sell-off paused after the Reserve Bank of Australia unexpectedly lowered its policy rate by a quarter point to a record low 2.25 percent.

The RBA's move supported the view it has become tougher for the Federal Reserve to consider raising interest rates in 2015 as more central banks seek to cut rates or engage in bond purchases in a bid to stimulate their economies.

Traders brushed off news that domestic factory orders fell for a fifth straight month in December.

Benchmark 10-year Treasurys notes were down 1 1/32 in price with a yield of 1.78 percent, up over 7 basis points from late on Monday. The 10-year yield is on track for its biggest 1-day jump since November 2013.

The 30-year bond were 2 23/32 lower in price, yielding 2.337 percent, up about 8 basis points from Monday.

Despite Tuesday's spike, Treasuries yields were not far from the lows they recorded last week on fears of deflation spreading globally.

On Friday, the 10-year yield fell to 1.637 percent, the lowest since May 2013, and the 30-year yield hit a record low of 2.221 percent.

Moreover, U.S. yields remain some of the highest in the world, making Treasuries attractive for investors who see negative yields in Germany, Switzerland and Japan, analysts and investors said.

"The level of global yields are so low. It makes U.S. bonds an attractive asset class," said Lisa Hornby, U.S. fixed income portfolio manager at Schroders Investment Management in New York.