TREASURIES-Yields drop after strong 10-year note auction

(Updates with 10-yr auction, adds quote, updates prices)
    * US sees strong demand for $20 bln 10-year note sale
    * German 10-year yields fall to record lows
    * Treasury to sell $12 bln 30-year bonds on Thursday

    By Karen Brettell
    NEW YORK, June 8 U.S. 10-year Treasury yields
fell on Wednesday after the government sold $20 billion in
10-year notes to strong demand, the second tranche of a total
$56 billion in coupon-bearing supply this week.
    With no major economic releases due this week, investors are
focused on Treasury supply and next week's Federal Reserve
meeting, when the U.S. central bank is expected to leave
interest rates unchanged.
    Traders have pushed back rate-hike expectations to September
at the earliest, after Friday's jobs report for May showed that
employers added only 38,000 positions in the month, the smallest
gain since September 2010. 
    The 10-year notes sold at a high yield of 1.702 percent,
around half a basis point below where the yields had traded
before the auction. 
    Investment funds, foreign central banks and other indirect
bidders on Wednesday purchased a record 74 percent share of the
notes, Treasury data showed. 
    "It was strong... there's definitely buyers out there. When
you look at yields across the globe the U.S. looks attractive,"
said Justin Lederer, an interest rate strategist at Cantor
Fitzgerald in New York.
    U.S. bonds pay far higher yields than comparable sovereign
debt in countries including Germany, where 10-year yields fell
to record lows of 0.06 percent on Wednesday, pushing closer to
negative territory.
    The German bunds have rallied on concerns about Britain's
referendum on European Union membership and the European Central
Bank's commencement of its corporate bond purchase program.
 
    Benchmark U.S. 10-year notes ended up 2/32 in
price to yield 1.707 percent, after falling to 1.697 percent
immediately after the auction, matching a two-month low that was
reached on Friday after the weak jobs report.
    "The market's trading in a tighter range and is better bid,"
said Dan Mulholland, head of Treasuries trading at Credit
Agricole in New York.
    The government will sell $12 billion in 30-year bonds on
Thursday, its final auction this week.
    A $24 billion auction of three-year notes on Tuesday was
relatively soft as indirect bidders reduced their participation.
 

 (Editing by Lisa Von Ahn and Chizu Nomiyama)



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Source URL:http://www.reuters.com/article/usa-bonds-idUSL1N1901SA

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