Bonds Edge Lower in Light Trade

U.S. Treasuries late Tuesday consolidated near the lowest yield/highest price levels in a week with the long bond hit hardest. Supply and improved economic data added weight in a low-volume holiday-shortened week. The week’s first auction didn’t go well, as many feared, with buyers requiring a higher-than-anticipated yield while overall demand hit the lowest since December 2008 and foreign participants dropped to the lowest since July.

The 30-year has been skirting the lows near 3.15% from a close near 3.12% Friday while the 10-year is near 2.57% from a 2.54% close. The five-year recently ticked to a new low near 2.065% from 2.03% Friday while the two-year dropped to 1.247% from a 1.205% close.

The $26 billion two-year note was awarded at 1.280% from 1.275% reported at the bid deadline marking the widest tail since August, the highest yield since October 2008 and from 1.085% in November. Demand dropped to $2.44 for each $1 on offer from $2.73 previously and an average $2.73, the lowest since December 2008. Indirect bidders, the proxy for official foreign interests, took just 32.7% versus 35.8% last month and an average 44.4%, the weakest since July. The $50 billion four-week bills saw an average reception while the $34 billion three-month and $28 billion six-month bills were well received.

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