Treasuries Pare Losses After $21 Billion 10-Year Note Auction

Treasuries pared losses after the U.S. drew stronger-than-average demand at an auction of $21 billion of 10-year debt.

The notes yielded 1.652 percent, compared with a forecast of 1.669 percent in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.95, versus an average of 3.01 percent for the past 10 offerings. Treasuries fell earlier, pushing 30-year yields to a one-month high, before the Federal Reserve ends a two-day policy meeting.

“Overall it was very strong,” said Thomas Simons, a government debt economist in New York at Jefferies Group Inc., one of 21 primary dealers obliged to bid at U.S. debt auctions. “The combination of things that have led to strong performance in the Treasury market over the past month.”

The current 10-year note yield was little changed at 1.66 percent at 11:46 a.m. New York time, according to Bloomberg Bond Trader prices. It touched 1.67 percent earlier, the highest since Nov. 27.

The 30-year bond yield increased as much as two basis points to 2.86 percent, the highest since Nov. 7, before trading little changed at 2.85 percent.

The Fed is forecast to decide to buy more Treasuries to spur the economic recovery. Its Operation Twist program, in which it sells shorter-maturity Treasuries in its holdings and buys longer-dated sovereign debt, is set to expire at the end of this month. The central bank also is purchasing $40 billion in mortgage bonds each month to spur the economy.

Treasuries fell earlier after President Barack Obama reduced his demand for tax increases as he and House Speaker John Boehner traded offers yesterday to try to avoid more than $600 billion in automatic tax increases and spending cuts.

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