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US Treasury yields hold higher after auction

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Scott Olson | Getty Images

U.S. government debt prices held lower Wednesday afternoon, boosting yields, amid a bounce in oil prices and following a weak auction of 10-year notes.

The yield, which moves inversely to the price, on the benchmark 10-year Treasury note climbed to 1.882 percent, up from 1.834 percent on Tuesday, but down from one-month highs seen earlier in the week.

The yield on the 30-year Treasury bond, meanwhile, traded around 2.679 percent, up from 2.639 percent close in the previous session. Yields recovered some of the losses seen on Tuesday, following weaker China data.

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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The Treasury Department on Wednesday auctioned $20 billion in 10-year notes at a high yield of 1.895 percent. The bid-to-cover ratio, an indicator of demand, was 2.49, the lowest since August 2015, according to Reuters.

Indirect bidders, which include major central banks, were awarded 56.5 percent, versus a recent average of 61 percent. Direct bidders, which include domestic money managers, bought 11.1 percent, compared with a recent average of 13 percent.

Oil prices climbed Wednesday after a sharply lower close Tuesday.

Brent traded at $40.74 per barrel Wednesday, up $1.09 or 2.8 percent from their last close and more than 40 percent higher than the 2016 lows hit in January. U.S. crude futures rose to $37.81 per barrel, up $1.31 from their last settlement and more than 40 percent above February's 2016 low.

U.S. crude oil futures settled down $1.40, or 3.69 percent, at $36.50 a barrel on Tuesday, their worst daily performance since Feb. 11.

Data for Wednesday included wholesale trade data for January, which showed a 0.3 percent increase in inventories, and a 1.3 percent drop in sales. U.S. oil inventories rose by 3.9 million barrels.

The Treasury will also sell $12 billion of 30-year bonds on Thursday. A $24 billion sale of three-year notes was met with disappointing demand Tuesday, as investors expected the search for safe havens to drive more investors to the auction, according to Reuters.

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Markets are also looking to the European Central Bank meeting Thursday, where investors hope President Mario Draghi will take action, with a possible further cut in the deposit rate, which is already in negative territory, together with a further extension of the period and quantity of asset purchases.

"We expect the ECB to announce a package of measures to counter these developments. Despite some of the negative rhetoric and warnings about the use of negative interest rates, we expect it to reduce the deposit rate by a further 20 basis points to -0.5 percent," said lead euro zone economist at Oxford Economics, Ben May.

"We also expect it to ease some of the negative effects of the deposit rate cut on banks by adopting a tiered deposit rate system to effectively reduce the 'tax' of negative rates on the banking system," he said.