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April 7, 2020, 4:23 p.m. EDT

Treasurys sell off as bond traders struggle to take down benchmark debt auction

U.S. Treasury Department sold 25 billion of 10-year notes Tuesday

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By Sunny Oh

U.S. Treasury yields rose Tuesday as traders struggled to take down a sale of benchmark 10-year notes, while investors also eyed signs the spread of the COVID-19 pandemic may be slowing in Europe and Asia.

What are Treasurys doing?

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00%   climbed 6 basis points to 0.735%, while the 2-year note rate /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y 0.00%   was up 1.4 basis points to 0.280%. The 30-year bond yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y 0.00%   rose 4.7 basis points to 1.330%.

What’s driving Treasurys?

A sale for $25 billion of 10-year notes on Tuesday drew tepid demand and caused broker-dealers to price in a “concession,” a process whereby they will push yields higher in order to ensure a successful auction.

Yet analysts say the Fed’s continued asset purchases will continue to offer support for traders and broker-dealers who want to off-load their holdings of government paper.

Stocks gave up their gains, helping to ease the selling pressure in the bond-market by the afternoon. Investors were initially buoyed by hopes that the U.S. and some Western European nations were making inroads into containing the COVID-19 disease, but the bullish momentum swiftly lost steam by the end of Tuesday’s session.

The number of confirmed cases of COVID-19 rose to more than 1.41 million. The U.S. has the most confirmed cases of the virus with 379,965 and at least 11,851 deaths, according to data aggregated by John Hopkins.

In economic data, the NFIB survey, a monthly snapshot of small businesses in the U.S., found that its optimism index fell in March to 96.4, an 8.1-point decline and the largest monthly decline in the survey’s history.

The Job Openings and Labor Turnover Survey for February showed companies had 6.9 million vacancies, but is likely to fall in the coming months as companies curtail hiring.

What did market participants’ say?

“The market put in a very significant concession heading into today’s auction,” said Thomas Simons, senior money market economist at Jefferies, in a note.

“All things considered, the auction could have gone worse due to the surprising $1 billion increase in supply that was announced this month,” he said.

add Add to watchlist BX:TMUBMUSD10Y
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June 5, 2020 4:58p
add Add to watchlist BX:TMUBMUSD02Y
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June 5, 2020 4:57p
add Add to watchlist BX:TMUBMUSD30Y
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June 5, 2020 4:58p

Sunny Oh is a MarketWatch fixed-income reporter based in New York.

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