Treasuries fell as a gain in U.S. retail sales and a slowing depreciation of China’s currency supported the view the Federal Reserve may raise interest rates next month.
Yields rose as the Treasury Department’s $16 billion sale of 30-year bonds drew below-average investor interest. A report showed consumer demand grew in July for everything from cars to clothing. China’s central bank signaled support for the yuan after a devaluation this week raised concern that a stronger U.S. dollar would delay the Fed’s path toward higher borrowing costs.
“China stabilized” its currency “and retail sales were solid,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “That contributes to the expectations for a September Fed liftoff.”
The 10-year Treasury yield rose four basis points, or 0.04 percentage point, to 2.19 percent as of 5 p.m. New York time. The 30-year bond yield rose two basis points to 2.86 percent.
The Treasury’s sale of 30-year bonds was rated a ‘2’ by seven of the Fed’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 securities yielded 2.880 percent, compared with an average forecast of 2.868 percent from six primary dealers. The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.26 compared with an average of 2.34 at the past 10 sales.
The offering comes a day after lackluster demand at an auction of 10-year notes, which was also rated a ‘2’ by four primary dealers. The bid-to-cover ratio at that auction was the lowest since March 2009.
Traders are pricing in a 50 percent probability that the Fed raises rates at the September meeting, based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff. That’s up from a 40 percent chance on Aug. 11, according to data compiled by Bloomberg.