Treasurys climbed after the U.S. sale of $16 billion in 30-year bonds drew the lowest yield at an auction since May 2013.
The debt yielded 3.224 percent, compared with a forecast of 3.256 percent in a Bloomberg News survey of eight of the Federal Reserve’s 22 primary dealers. The bid-to-cover ratio, which gauges demand by the amount bid with the amount offered, was 2.60, versus an average 2.40 at the past 10 sales. Treasurys rose earlier as weaker-than-forecast economic data added to bets policy makers will keep interest rates low for longer.
“It was a very successful auction,” said William Larkin, a money manager who oversees $520 million in assets at Cabot Money Management in Salem, Massachusetts. “The market is pushing out expectations that the Fed is going to raise rates into the second half of next year, which is allowing the long end to run a little bit longer.”
The current 30-year bond yield dropped three basis points, or 0.03 percentage point, to 3.21 percent at 1:20 p.m. in New York, according to Bloomberg Bond Trader prices, and touched 3.20 percent. It reached 3.18 percent Aug. 8, the lowest intraday level since June 6, 2013. Five-year note yields fell two basis points to 1.56 percent.
Indirect bidders, an investor class that includes foreign central banks, purchased 45.9 percent of the bonds, compared with an average of 44 percent for the past 10 sales.
Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, bought 24.4 percent of the bonds, the most since October 2011. That compared with an average of 15.7 percent at the past 10 auctions.
The long bond has returned 16 percent this year through yesterday, the most in the period since 2010, versus a gain of 3.8 percent by the broader U.S. Treasurys market, according to Bank of America Merrill Lynch indexes. Thirty-year securities lost 15 percent in 2013, versus a 3.4 percent decline by Treasurys overall.
Today’s auction was the final of three note and bond offerings this week. The U.S. sold $27 billion of three-year debt on August 12 at a yield of 0.924 percent and auctioned $24 billion of 10-year debt yesterday at a yield of 2.439 percent.
There’s a 34 percent chance the Fed will increase its benchmark interest-rate target to at least 0.5 percent by June, futures contracts indicate, down from a 51 percent likelihood seen on July 31. The central bank has held its target for the rate in a range of zero to 0.25 percent since December 2008.
U.S. government bond yields fell earlier as the Labor Department reported claims for jobless benefits rose to 311,000 last week, the highest level in six weeks.
The euro region’s recovery unexpectedly stalled in the second quarter. Gross domestic product was unchanged from the first quarter, when it increased 0.2 percent, according to Eurostat, the European Union’s statistics office in Luxembourg.
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