NEW YORK: Seven-year notes are popular with many asset managers, but they may demand higher yields, or lower prices, to step in at the auction.
Treasuries had gained a slight safety bid earlier on Thursday as stocks fell after Saudi Arabia and its allies launched air strikes on Yemen.
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US Treasuries prices fell on Thursday before the government is due to sell $29 billion in new seven-year notes on Thursday, the final auction of this week’s $90 billion in new fixed-rate, short- and intermediate-dated supply.
Weak demand for the Treasury’s $35 billion sale of five-year notes on Wednesday sent yields higher, with bidding the weakest since 2009 as investors stepped away. U.S. dollar weakening against the euro added to bond weakness.
“I do think there is underlying demand, but yesterday’s auction showed you that the underlying demand isn’t at the market, it’s lower than where we are,” said Tom Tucci, head of Treasuries trading at CIBC in New York. Month-end buying may help Thursday’s sale.
Seven-year notes were last down 2/32 in price to yield 1.75 percent, up from 1.72 percent late on Wednesday.
Benchmark 10-year notes fell 2/32 in price to yield 1.95 percent, up from 1.92 percent.
Investors have pulled back from bonds as yields fall towards two-year lows, even as worsening economic data is pushing back expectations of an interest rate hike until later in the year.
Gross domestic product data for the fourth quarter that will be released on Friday will be closely watched for further indications that growth is slowing.
