Bond Market Updates and Reports

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Bond Market Update

Bond Market Updates and Reports at SmartMoney.com
August 27, 2008 3:25 PM

By Deborah Levine

Treasurys gained Wednesday, reversing earlier losses, after the government saw sufficient demand for its largest two-year note auction in more than a decade.

Two-year note yields fell (UST2YR) 6 basis points, or 0.06%, to 2.28%.

The Treasury Department sold $32 billion of notes maturing in August 2010 to yield 2.38%.

Indirect bidders, a class of investors that includes foreign central banks, bought 29.5% of the sale, pretty close to the average of 30.4% in the last four auctions. Some traders said that's encouraging since it was the largest auction since at least 1992.

Investors bid $2.18 for every dollar offered, the lowest since February.

The government will also sell $22 billion in five-year notes tomorrow, the most since the Treasury began issuing the debt monthly instead of quarterly in 2003.

Durable goods

Treasurys has been under pressure earlier due to rising crude-oil prices and a report that showed a rise in the U.S. orders of durable goods in July.

Ten-year note yields slid (UST10Y) 1 basis point to 3.77%. Prices move inversely to yields.

"Commodity prices are a little higher and people are worried that can be inflationary," said William Hornbarger, fixed income strategist at Wachovia Securities.

Orders for durable goods rose 1.3% last month, after a 1.3% increase in June that was higher than previously reported. Economists surveyed by MarketWatch expected a 0.2% increase last month.

Atlanta Federal Reserve President Dennis Lockhart said he expects inflation to ease in coming months.

(END) Dow Jones Newswires

08-27-08 1525ET

Copyright (c) 2008 Dow Jones & Company, Inc.

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