U.S. Treasurys prices rose on Wednesday, ending a three-day losing streak as yields near the upper end of their recent range drew some buyers.
Gains were posted even though the U.S. Treasury's $24 billion sale of 10-year government debt got a tepid reception.
The Treasury will sell 30-year bonds on Thursday in the final leg of its three-part refunding. It sold three-year notes on Tuesday.
Longer-dated yields rose to three-week highs in early trade on surprisingly strong Chinese and German economic data that soothed concerns about a global slowdown.
But the higher yields, along with comments from a top European policymaker on limiting future stimulus, revived a bid for bonds.
"We got to the higher end of a short-term trading range - the top part of that range between 1.55 percent and 1.81 percent on the 10-year yield," said Wilmer Stith, portfolio manager at the Wilmington Broad Market Bond Fund in Baltimore, Maryland. "The 10-year yield got close to 1.80 percent and then the market started to improve."
Benchmark 10-year Treasury notes last traded up 3/32 in price to yield 1.771 percent, down from 1.798 percent at
Tuesday's close. The 30-year bond rose 5/32, its yield easing to 2.99 percent from 3.02 percent late Tuesday.
Benchmark yields have risen in the wake of a better-than-expected U.S. jobs report last Friday, but they remain little changed from a month earlier as skepticism lingered over the global economy and a solution to the fiscal morass in Europe.
"Ten-year yields got down to the 1.60s before Friday's U.S. payrolls report," noted Robert Tipp, chief investment strategist at Prudential Fixed Income in Newark, New Jersey, with more than $1 trillion in assets under management.
"The April payroll data, with the upward revisions to prior months' growth, significantly rewrote the job growth story for the first part of the year," Tipp said. "You went back to the question of when the Fed would start tapering off its large-scale bond purchases," he said, referring to the Federal Reserve's unconventional monetary accommodation strategy.
But U.S. government debt yields made only a limited move up on that revised job growth picture, Tipp said.
"On one hand is stronger U.S. data, but on the other hand is a global context, with Japan embarking on monetary easing - but with no fiscal stimulus - while Europe in the grip of aggressive fiscal retrenchment, clearly a negative for growth," he said.
"You have to ask how cheap U.S. bonds can we get with G4 growth so weak in total and U.S. yields at attractive levels relative to Japan and to German bunds?" Tipp said.
The Treasury's ability to sell $24 billion in 10-year notes on Wednesday provided one sign that the appropriate level for 10-year yields is closer to 1.70 percent than to 2 percent, he said. The need to distribute large amounts of new supply "is where the rubber meets the road," Tipp said.
In addition, while Friday's U.S. employment data painted a brighter picture than previously rendered, "the overall employment-to-population ratio has remained at rock-bottom levels and wages are still decelerating," considerations that should also restrain any move up in yields, he said.
Continued bond purchases by the Fed as part of its efforts to stimulate lending and economic activity also keep yields from moving much higher, Tipp added.
The central bank bought $3.65 billion in government debt due February 2019 to April 2020 on Wednesday.
Day's Yield Highs Hit Early
Bond yields hit session highs early in the day when growth in China's exports and imports in April and German industrial output in March beat expectations.
They retreated as buying in the wake of European Central Bank executive board member Yves Mersch's comments that the ECB will not subsidize markets with asset purchases. Market News earlier reported the central bank has no program yet to purchase asset-backed securities.
Mersch's comment pared optimism about this targeted ECB stimulus scheme, which some had thought might help jumpstart the euro zone economy.
In "when-issued" activity, traders expected the $16 billion 30-year note issue to sell at a yield of 3.005 percent on Thursday.