By Ellis Mnyandu
NEW YORK, Nov 9 (Reuters) - U.S. government debt prices were steady to modestly higher on Monday following strong demand for a record-sized Treasury note auction, but a rally in U.S. stocks helped curb some of the safe-haven appeal of bonds, limiting gains.
The three-year note sale won a rousing bid as investors sought shorter-dated Treasuries to gain a more decent yield than in Treasury bills, according to analysts.
In the $40 billion three-year note auction, indirect bids, often viewed as a proxy for foreign demand, totaled a record $27.23 billion. The three-year notes were sold at a high yield of 1.404 percent with 38.42 percent of the bids awarded at the high.
'As the results indicated and as price action showed, there's just been no let up in the demand for bonds,' said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.
Even so, the resurgent appetite for riskier asset tempered some of the safe-haven appeal of government debt, causing the longer-dated U.S. Treasuries to briefly pare gains that followed the auction as the session progressed.
'The market is a little bit tired after a really good run and after some short-covering following the successful 3-Year bond auction,' added Rupert at Action Economics.
The 3-year Treasury note was unchanged, yielding 1.36 percent, down from 1.37 percent late on Friday.
Benchmark 10-year notes were trading 7/32 higher in price to yield 3.48 percent, down from 3.51 percent late on Friday, while 30-year bonds were 4/32 higher to yield 4.39 percent from 4.40 percent.
Investors' focus now shifts to the remainder of the Treasury's refunding auctions this week.
Following the three-year auction, the Treasury will sell $25 billion in benchmark 10-year notes on Tuesday and $16 billion in 30-year bonds on Thursday as part of this week's $81 billion quarterly refunding.
'Two-year notes are already through their resistance level, so I think the very steep slope of the curve is going to help the bond auctions tomorrow and Thursday,' said William O'Donnell, head of U.S. Treasury Strategy at RBS Securities in Stamford, Connecticut.
'There clearly is a lot of cash sloshing around in the front-end of the curve, with bills trading at such low yield levels. There appears to be a move to try to move out from the bill market or overnight cash into higher yielding instruments such as 2-year notes which have done well since auction and perhaps now 3s.'
There was very little in the way of economic data on Monday following Friday's government non-farm payrolls report that showed the U.S. unemployment rate rose to 10.2 percent in October. The bond market will be closed on Wednesday in observance of Veterans Day.
(Editing by Andrew Hay and Diane Craft) (Ellis.Mnyandu@thomsonreuters.com; +1 646 223 6085; Reuters Messaging:ellis.mnyandu.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Nov 9 (Reuters) - U.S. government debt prices were steady to modestly higher on Monday following strong demand for a record-sized Treasury note auction, but a rally in U.S. stocks helped curb some of the safe-haven appeal of bonds, limiting gains.
The three-year note sale won a rousing bid as investors sought shorter-dated Treasuries to gain a more decent yield than in Treasury bills, according to analysts.
In the $40 billion three-year note auction, indirect bids, often viewed as a proxy for foreign demand, totaled a record $27.23 billion. The three-year notes were sold at a high yield of 1.404 percent with 38.42 percent of the bids awarded at the high.
'As the results indicated and as price action showed, there's just been no let up in the demand for bonds,' said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.
Even so, the resurgent appetite for riskier asset tempered some of the safe-haven appeal of government debt, causing the longer-dated U.S. Treasuries to briefly pare gains that followed the auction as the session progressed.
'The market is a little bit tired after a really good run and after some short-covering following the successful 3-Year bond auction,' added Rupert at Action Economics.
The 3-year Treasury note was unchanged, yielding 1.36 percent, down from 1.37 percent late on Friday.
Benchmark 10-year notes were trading 7/32 higher in price to yield 3.48 percent, down from 3.51 percent late on Friday, while 30-year bonds were 4/32 higher to yield 4.39 percent from 4.40 percent.
Investors' focus now shifts to the remainder of the Treasury's refunding auctions this week.
Following the three-year auction, the Treasury will sell $25 billion in benchmark 10-year notes on Tuesday and $16 billion in 30-year bonds on Thursday as part of this week's $81 billion quarterly refunding.
'Two-year notes are already through their resistance level, so I think the very steep slope of the curve is going to help the bond auctions tomorrow and Thursday,' said William O'Donnell, head of U.S. Treasury Strategy at RBS Securities in Stamford, Connecticut.
'There clearly is a lot of cash sloshing around in the front-end of the curve, with bills trading at such low yield levels. There appears to be a move to try to move out from the bill market or overnight cash into higher yielding instruments such as 2-year notes which have done well since auction and perhaps now 3s.'
There was very little in the way of economic data on Monday following Friday's government non-farm payrolls report that showed the U.S. unemployment rate rose to 10.2 percent in October. The bond market will be closed on Wednesday in observance of Veterans Day.
(Editing by Andrew Hay and Diane Craft) (Ellis.Mnyandu@thomsonreuters.com; +1 646 223 6085; Reuters Messaging:ellis.mnyandu.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.