By Sam Goldfarb
U.S. government bond prices edged lower Wednesday as an auction of 10-year notes showed limits to investors' recent appetite for Treasurys.
The yield on the benchmark 10-year Treasury note settled at 2.325%, compared with 2.309% Tuesday.
Yields, which rise when bond prices fall, were stable for much of the morning but ticked higher about an hour before the 1 p.m. auction, suggesting traders needed higher yields to get involved in the sale.
After the earlier selling, the $23 billion auction did draw strong demand, but the 10-year yield held on to its gains.
That ended a four-day streak of declines spurred by a variety of factors, including signs that as the Federal Reserve starts to scale back its bond purchases, the Treasury Department won't sell as much long-term debt as some investors had expected.
Investors have also grown more skeptical about the chances of Congress passing tax cuts. That has helped boost Treasurys, as tax cuts could prompt more bond issuance and inflation -- both negatives for long-term Treasury debt.
Investors are "waiting on the tax proposals to see what the details" are, said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co.
Wednesday's sale of 10-year notes followed a $24 billion sale of three-year notes Tuesday. A $15 billion auction of 30-year bonds is on tap for Thursday. Yields frequently creep higher heading into auctions but were late to do so this week.
Volatility in the bond market could be limited this week by a dearth of economic data.
Jobs data released Nov. 3 continued to show muted inflation pressures, as average hourly earnings for workers slipped from the previous month. Consumer-price index data and retail sales numbers are scheduled to be released on Nov. 15, marking the next major events on the economic calendar.
Despite persistently soft inflation, Federal Reserve officials have strongly signaled that they plan to raise interest-rates in December in what would be the third increase of the year.
That has softened demand for short-term bonds, which are especially sensitive to changes in interest rates, even as investors have scooped up longer-term Treasurys.
The yield on the two-year Treasury note settled Wednesday at 1.645%, compared with 1.629% Tuesday. The gap between the 10-year and two-year yields held steady at 0.68 percentage points after narrowing for the previous nine sessions.
Write to Sam Goldfarb at [email protected]