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US Treasurys slip after 30-year bonds sale and ECB hints of tighter monetary policy

  • The Wall Street Journal reported the ECB is likely to signal in September that its asset purchase program will be gradually wound down next year.
  • Fed Chair Janet Yellen says U.S. economy is strengthening but hints that rate hikes could be more gradual.
  • The Treasury Department auctioned $12 billion in 30-year bonds at a high yield of 2.936 percent.
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U.S. government debt prices were lower on Thursday as investors responded the European Central Bank's renewed hawkishness and remarks from to Federal Reserve Chair Janet Yellen.

Earlier on Thursday, the Wall Street Journal reported the ECB is likely to signal in September that its asset purchase program will be gradually wound down next year.

The report lifted yields in Europe and in the U.S. The yield on the benchmark 10-year Treasury note, which moves inversely to price, was higher at around 2.343 percent, while the yield on the 30-year Treasury bond was also higher at 2.913 percent.

Yields came into Thursday's session under pressure after Yellen struck a dovish note in her Wednesday testimony in front of Congress. She said the U.S. economy was healthy enough for further rate hikes and the winding down of its bond portfolio. She hinted that these hikes could be more gradual, however, as she cautioned that inflation still remains stubbornly low.

Yellen testified in front of Congress again on Thursday, which could be one of Yellen's last. The Trump administration is set to decide whether or not it will nominate Yellen for a second term.

The Treasury Department auctioned $12 billion in 30-year bonds at a high yield of 2.936 percent.

The bid-to-cover ratio, an indicator of demand, was 2.31. Indirect bidders, which include major central banks, were awarded 61.7 percent. Direct bidders, which includes domestic money managers, bought 6.4 percent.

On the data front, Thursday saw the release of jobless claims, which totaled 247,000 vs 245,000 estimate. The Labor Department said on Thursday its producer price index for final demand ticked up 0.1 percent last month after being unchanged in May.

The CBO announced that President Trump's proposed fiscal year 2018 budget would reduce the cumulative deficit by one-third relative to the CBO's baseline projections over a decade. Debt as a percent of GDP would be an estimated 80 percent, 11 percent lower than under current projections.

In Washington, the revised Republican bill to replace Obamacare was revealed by Senate leaders, and reportedly allows the sale of less-generous insurance plans, retains significant planned cuts to Medicaid, keeps some Obamacare taxes on the wealthy and offers larger subsidies to help people buy health plans than the old version did.

In oil markets, Brent crude traded at around $48.37 a barrel on Thursday, up 1.32 percent, while U.S. crude was around $46.04 a barrel, up 1.21 percent.