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Demand at an auction for US Treasuries has waned this week, culminating in a soft $12bn sale of 30-year bonds on Wednesday.
It comes as the yield on the benchmark 10-year Treasury has fallen 8 basis points to 2.28 per cent since the start of the week. Analysts said the rally created greater risk of the price falling and yield rising after an auction, reducing the incentive for investors to bid, despite appetite for Treasuries remaining strong.
“We had been expecting a tail as we saw the relative concession for the bond as insufficient to overcome a low-yield level,” said Aaron Kohli, an analyst at BMO Capital Markets.
A 3-year auction on Monday and 10-year sale on Tuesday saw similar results. Primary dealers, which underwrite the US government’s debt, typically walked away with a lower-than-average percentage of the auctions, with other investors showing stronger appetites, according to BMO.
Volatility in Treasury markets has also been rising, with a widely tracked Merrill Lynch index (MOVE) rising from 61 to 70 so far this month.