10-year yield has its worst day in nearly 3 months


Bond prices logged their best one-day gain in about three months on Thursday after the U.S. government's auction of 30-year bonds drew the strongest demand since late last year.

The yield on the benchmark 10-year Treasury note fell to 2.383 percent from 2.478 percent on Wednesday, marking its biggest one-day decline since March 18. Thirty-year bond was at 3.10 percent, down 11 basis points on the day.

The Treasury Department auctioned $13 billion in 30-year bonds at a high yield of 3.138 percent, the highest since December. The bid-to-cover ratio, an indicator of demand, was 2.54, also the strongest since December.

Indirect bidders, which include major central banks, were awarded 52 percent, better than the 48 percent recent average. Direct bidders, which includes domestic money managers, brought 14 percent, versus a recent average of 16 percent.

Yields tumbled earlier on the back of upbeat U.S. data and after the International Monetary Fund said its team made "no progress" on resolving Greece's debt crisis, according to The Associated Press. An IMF spokesperson told reporters Thursday, "We are well away from an agreement."

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Earlier, a report showed U.S. retail sales surged in May as households boosted purchases of automobiles and a range of other goods even as they paid a bit more for gasoline, the latest sign economic growth is finally gathering steam.

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The Commerce Department said on Thursday retail sales increased 1.2 percent last month after an upwardly revised 0.2 percent gain in April.

Economists polled by Reuters forecast that retail sales rose 1.1 percent month-on-month and 0.7 percent excluding autos. That compares with no increase in retail sales in April and a rise of just 0.1 percent excluding autos.

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Separately, initial claims for state unemployment benefits increased 2,000 to a seasonally adjusted 279,000 for the week ended June 6, versus expectations of 277,000.

Meanwhile, business inventories rose a more-than-expected 0.4 percent in April, their biggest gain in nearly a year.

The upbeat reports come after last week's stronger-than-expected U.S. jobs data renewed talk of a hike in rates by the Federal Reserve in the months ahead, possibly in September.

On Wednesday, the Treasury Department auctioned $21 billion of 10-year notes at a yield of 2.461 percent, its highest since September. Demand at auction was solid with the bid-to-cover ratio coming in at 2.74, compared with an average of 2.68.

Elsewhere, the German 10-year Bund yield, which has set the tone for U.S. Treasury trade in recent weeks, was trading at just shy of 1 percent, holding near the previous day's highs.

—CNBC's Dhara Ranasinghe and Reuters contributed to this report.