By Dow Jones Business News, October 10, 2013, 01:45:00 PM EDT
By Min Zeng
Treasury bonds clawed back some price losses Thursday after strong demand at the 30-year auction, though prices remain
lower as U.S. stocks rallied.
The bonds were sold at a yield of 3.758%, compared to 3.777% right before the auction. Lower yields mean higher
bidding prices, suggesting that demand was stronger than dealers had anticipated.
Traders said the selling before the auction sent bond yields to attractive levels, pinning buying interest with yield
The bid-to-cover ratio, the main gauge of overall demand, was 2.64, the highest since February. Indirect bid, a proxy
measure of demand from foreign investors, rose to 41.9%, a high since March. Direct bid, a category that includes
bidding from U.S. investment funds, jumped to 22.6%, the highest in more than a year.
The solid auction pushed bond prices up from session lows. In recent trade, the benchmark 10-year note price was 15/32
lower, yielding 2.707%, according to Tradeweb. Bond prices fall when their yields rise.
Signs of thawing of the U.S. fiscal gridlock encouraged investors to cash out of safe-harbor Treasury bonds to embrace
stocks, pushing up the benchmark 10-year yield to 2.722% earlier, the highest level in nearly three weeks.
The anxiety over the U.S. fiscal crisis eased as conservative Republicans warmed to the idea of a short-term increase
in the country's borrowing limit. A White House spokesman said Thursday afternoon that President Barack Obama "is happy
that cooler heads seem to be prevailing in the House."
Investors were optimistic that "a deal can be achieved that will at least avert the risk of default in the short
term," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York. "That is taking
some of the fear bid out the Treasury market."
Still, Mr. Milstein cautions that "it is early in the process." Some other traders warn the negotiations could fall
The clock is ticking toward the Oct. 17 deadline the Treasury said lawmakers need to meet to boost the country's
borrowing limit. Many analysts have warned that failure to increase the debt ceiling could push the Treasury into the
first-ever default on Treasury debt.
Write to Min Zeng at firstname.lastname@example.org
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