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Treasury Department auctions $13 billion of 30-year bonds at a high yield of 2.597%

Treasury prices, already under pressure, fell further on Thursday as the U.S. government's auction of 30-year bonds was met with weak demand.

The Treasury Department auctioned $13 billion in 30-year bonds at a high yield of 2.597 percent. The bid-to-cover ratio, an indicator of demand, was 2.18, the lowest since May 2014. The bid-to-cover ratio was much weaker than the 2.42 recent average.

The benchmark 10-year yield was up 5 basis points at 1.96 percent, while the 30-year yield was up 7 basis points at 2.60 percent—well above the market rate at the time of sale. Treasury yields move inversely to bond prices.

The two-year yield hovered near its highest in a week at 0.5438 percent.

Indirect bidders, which include major central banks, were awarded 51.3 percent, while direct bidders, which includes domestic money managers, brought 7 percent. Dealers took 41.8 percent of the auction, which was above the one-year average of 35 percent.

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Peter Boockvar, chief market analyst at the Lindsey Group, said U.S. yields are "very sticky" around their current levels.

"Bottom line, the 30 yr is somewhat of a different animal relative to other parts of the curve in terms of gauging market sentiment because pension funds and insurance companies are big players," Boockvar said in an emailed statement. "That said, today's poor auction is influencing the whole curve..."

U.S. yields were initially lower as the German 10-year Bund yield fell to a record low of 0.151 percent, more than 1.75 percentage points below its U.S. counterpart.

Symbol
Yield
 
Change
%Change
US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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European yields have fallen since the European Central Bank embarked on its 1.1 trillion euro bond purchase program aimed to combat deflation.

While the euro zone economy has struggled, the United States has been on a modest growth track with steady reduction in unemployment. This has raised discussion at the Federal Reserve whether it may be time to end its near zero interest rate policy it adopted at the end of 2008.

"We hear every day about all the foreign money that is going to compress US Treasury yields relative to overseas yields, in Europe and Japan in particular," Boockvar said. "While maybe there is money flowing from overseas, US yields are remaining very sticky around current levels."

On Thursday, the Labor Department said workers filing for first-time jobless benefits totaled 281,000 last week, less than what analysts had forecast.

The four-week average of claims fell to its lowest since 2000. This gauge of labor conditions followed a disappointing March payrolls report that showed a sharp deceleration in hirings.

Reuters contributed to this report.