Treasury yields move higher as market adjusts to new supply

Treasurys sold off Thursday as U.S. stock indexes climbed, pushing yields higher, as the market adjusted to an influx of new bonds.

Yields dipped after an auction of 30-year notes received strong demand, but quickly turned higher as the market easily absorbed the new bonds.

The trading action following the auction resembled activity from Wednesday’s session, when an auction of 10-year notes and an influx of corporate supply helped turn yields lower on the day, said Jonathan Rick, interest rate derivatives strategist at Crédit Agricole.

“We’re in a slightly different situation because stocks are up a bit, but we’ll see,” he said.

Indirect bidders, a group that includes foreign central banks, received 66% of new bonds at auction, compared with 52% average for reopenings. A reopening is when the Treasury offers additional amounts of an outstanding debt issue instead of auctioning off an entirely new issue.

Notes sold during a reopening have the same maturity date, identification number and interest rate as the original issue.

Treasury yields have moved in a narrow range this week as investors look ahead to next week’s meeting of Federal Reserve policy makers. Some investors expect policy makers to raise interest rates at next week’s meeting. Higher rates would likely push yields higher in the short term as the market adjusts, analysts say.

The yield on the 10-year Treasury note was up 4.6 basis points to 2.227%, while the yield on the two-year note was up 0.4 basis point to 0.745%.

The yield on the 30-year bond was up four basis points at 2.984% after the auction.