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Bonds gain after Treasury delays debt auction

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Long-dated U.S. Treasurys rose on Thursday amid news that federal officials were pushing back an auction of two-year Treasury notes because of the debt-ceiling limit.

A Treasury announcement detailing the unusual auction delay, originally expected on Tuesday, knocked the two-year note's yield to a session low of 0.596 percent.

Yields on the note, a maturity especially sensitive to Federal Reserve interest-rate shifts, were last down 3 basis points at 0.60 percent.

Other shorter-term Treasurys, including the five-year note, were also up in price. The five-year was last yielding 1.33 percent, down 2 basis points on the day.

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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"This means same demand and less supply. It's created more safe haven demand for Treasuries in these times of uncertainties with the two-year note leading the way," said John Canavan, market strategist at Stone & McCarthy Research Associates in Princeton, New Jersey. "The announcement was not expected."

The Treasury said it would go ahead with other debt sales next week but added there was a risk the government might not be able to settle the 2-year note on Nov. 2.

With U.S. stocks ahead more than 1 percent, yields on the 30-year Treasury bond were as high as 2.89 percent before easing to 2.85 percent.

Stocks were lifted by strong corporate profits from McDonald's and others, as well as by jobless-claims data that were the lowest on a four weeks-average basis since 1973.

The U.S. Treasury last postponed a debt auction in 2003, according to Aaron Kohli, interest rates strategist at BMO Capital Markets in New York. The sale was put off one day.

"This has potential to be delayed by more as the settlement is close to Treasury's closer 'drop-dead' date of Nov 3rd," Kohli said in a note to clients. "Looking ahead, the potential is for delays in refundings in early November as well."