Treasury seven-year notes rose after a $29 billion auction of the securities as investors were attracted by the highest auction yield since December.
The current note yield reached a one-week low on auction demand even as the Federal Reserve considers when to raise interest rates later this year. Treasuries fluctuated earlier after a report showed jobless claims unexpectedly increased while remaining below 300,000 for a 12th straight week.
“The larger investors are participating in these auctions, even as yields go down,” said Jim Vogel, head of interest-rate strategy at FTN Financial in Memphis, Tennessee. “We’re still getting really solid participation.”
Current seven-year note yields dropped one basis point, or 0.01 percentage point, to 1.89 percent at 5 p.m. in New York, according to Bloomberg Bond Trader prices.
The auction produced a yield of 1.888 percent, the highest level since 2.13 percent at the Dec. 24 auction. The sale was rated a ‘4’ by four of the Federal Reserve’s 22 primary dealers, based on a scale of one through five, with one being a failed auction and five judging the results as outstanding.
The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.49, compared with an average of 2.47 at the past 10 sales.
The Treasury’s sales of two- and five-year notes earlier this week were also priced at the highest yields of 2015. The U.S. sold $35 billion of five-year notes Wednesday at a yield of 1.560 percent and the $26 billion offering of two-year notes yielded 0.648 percent on May 26.
Jobless claims increased by 7,000 to 282,000 in the week ended May 23, a Labor Department report showed. The median forecast of 51 economists surveyed by Bloomberg called for 270,000.
“The labor market, while strong, is slowing down a little bit,” said Gary Pollack, who manages $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “It’s too early to say that the Fed’s going to have enough evidence to move yet. That’s what the big discussion is in the market right now, even at the Fed.”
The U.S. central bank has held its target for the federal funds rate at virtually zero since December 2008 to bolster economic growth.
U.S. 10-year notes yield 0.95 percentage point more than their G-7 nation peers, according to data compile by Bloomberg. Treasuries of all maturities have lost 0.5 percent this month, while gaining 0.6 percent this year, according to the Bloomberg U.S. Treasury Bond Index.