U.S. Sells 30-Year Bonds At Record Low 2.58% Yield
07/12/2012| 02:16pm US/Eastern
The U.S. government paid a record-low borrowing cost to raise 30-year debt Thursday as global growth concerns compelled investors to stock up on safe-haven Treasurys.
Buyers accepted a 2.58% yield in exchange for so-called long bonds, marking the smallest rate the Treasury has ever had to pay to sell 30-year debt. The previous record was 2.72%, set at June's auction.
Interest was strong. A measure of overall demand, called the bid-to-cover ratio, came in at 2.70 and tops the 2.61 average over the last six 30-year offerings. Indirect bidders, a group that proxies overseas interest, bought 36.8% of the total sale. That is the highest proportion since September 2011.
Direct buyers, including domestic banks and fund managers, picked up 20.1% of the sale.
This strong attendance follows a record-setting 10-year note auction Wednesday. The direct bidding group stood out in that sale, buying nearly half the offering and catching many auction observers off guard.
In recent trading, long-end Treasury prices continue to find good support. Benchmark 10-year notes rose 8/32 in price to yield 1.488%, inching toward its all-time low of 1.437%. The 30-year bond gained 10/32 to yield 2.575%, flirting with its own all-time low of 2.505%. Bond prices rise when yields fall.
Fears about a slowdown in global growth resurfaced Thursday in the wake of some discouraging economic signals out of Australia and Asia. Australia's unemployment rate rose in June, while South Korea's central bank unexpectedly lowered rates to support its economy. Meanwhile, International Monetary Fund director Christine Lagarde said she sees China's growth coming in below 8% in 2012.
While several central banks in that region took action to help spur growth--including the Bank of Japan's decision to buy more short-end bills--the Federal Reserve has thus far held back on committing to more stimulus. Minutes released from the Fed's latest policy meeting showed more concerns about the pace of recovery, but stopped short of assuring investors that more monetary stimulus would be provided.
"The problem here, as it is abroad, is growth," said John Hyll, portfolio manager at Loomis, Sayles & Co. His firm sees 10-year Treasurys yielding 1.5% through year end, with some possibility of it sinking a bit lower. The firm forecasts about 2% growth in the U.S. this year, and a below-consensus 1.9% in 2013.
Analysts expect growth concerns to weigh on market participants for months to come, which will keep safe-haven assets well bid. The demand for financial safety has spread beyond the U.S Treasury market.
The U.K. auctioned off its own set of 10-year debt earlier, at a record-low yield of 1.719%. This comes after a German 10-year bund auction Wednesday that also sold at a record low 1.31%. Meanwhile, Dutch two-year debt became the latest government yield to break into negative territory, recently at -0.024%.
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