U.S. Treasurys prices ended higher on Wednesday on weaker than expected economic data, though thin demand for the U.S. Treasury's new five-year notes, even at higher yields, showed that jitters persist over when the Federal Reserve is likely to pare back its purchase program.
The Treasury sold $35 billion in five-year notes to the lowest demand since September 2009, with a bid-to-cover ratio of 2.45 times.
The notes sold at a high yield of 1.48 percent, the highest auction yield since July 2011.
"We've had two soft auction receptions so far this week," said Ian Lyngen, senior Treasury strategist at CRT Capital.
The results of the two- and five-year do not bode well for the seven-year auction tomorrow. "There's limited risk appetite ahead of the end of the quarter," Lyngen said.
Five-year and seven-year notes, which are the most sensitive to future rate policy, have been the worst Treasurys performers in a dramatic selloff since Fed Chairman Ben Bernanke said last Wednesday that the U.S. central bank is likely to pare back its bond purchases if economic momentum stays on track.
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Investors remained nervous even though yields have increased almost threefold since the beginning of May.
Five-year note yields last traded at 1.43 percent. They have increased from around 1.05 percent before Bernanke's comments last week and from around 0.65 percent at the beginning of May.
"The auction was relatively weak, though there was decent end-user demand, as evidenced by the indirect bid," said Dan Mulholland, managing director in Treasurys trading at BNY Mellon in New York. Direct bidders, which buy directly from the Treasury, all but disappeared on Wednesday.
Indirect bidders, which includes fund managers and other investors who buy via dealers, bought 53 percent of the notes, the highest level since January 2010. Still, overall demand was low even as selling by dealers before the auction took yields up by around 2 basis points in an effort to create a stronger sale.