Yields on US Treasuries declined for a third straight day on Wednesday as positive news on inflation and US-China trade relations boosted investor demand.
An auction of 10-year Treasuries also showed healthy appetite for longer-dated US securities, allaying some fears that foreign investors might be moving away from the market. This could be tested again on Thursday at a $22 billion auction of 30-year bonds, however.
The developments showed somewhat higher investor spirits despite concerns for the path of US monetary policy, the American fiscal situation and the chances of a durable trade resolution with Beijing, analysts said.
The 10-year notes sold at a high yield of 4.421 percent, about half a basis point lower than before the auction, the bid-to-cover ratio, a measure of demand, was 2.52, near recent trends.
“I think you could probably have a sigh of relief that the 10-year auction didn’t tail at all but tomorrow is going to be the bigger test” for demand, said Lawrence Gillum, fixed-income strategist for LPL Financial, referring to worries over appetite for global long-dated government debt securities.
“The 30-year auction is the big one,” he added.
Earlier in the day, the Labor Department reported that the closely watched 12-month increase in “core” consumer prices, which excludes the volatile food and fuel categories, had held steady at 2.8 percent in May, a tenth of a point lower than a consensus forecast among economists polled by Reuters, easing some pressure on the Federal Reserve to maintain higher interest rates for longer.
