NEW YORK- Treasury yields ascended to multi-week highs on Tuesday in choppy trading as two lackluster debt auctions raised doubts about demand for US government debt.
Investors also digested a mixed batch of data that speaks to the uncertainty surrounding the pace and timing of the Federal Reserve’s easing cycle, widely viewed to start this year.
The bond market faced massive supply on Tuesday as well, with the auction of $69 billion in new US two-year notes and $70 billion in five-year Treasuries. In total, the Treasury sold $297 billion in bills and notes on Tuesday.
For the week, the Treasury’s total auction volume was more than $600 billion.
“With $297 billion in nominal supply on Tuesday between coupons and bills, I think some indigestion is to be expected,” said Tom Simons, US economist, at Jefferies in New York.
“I saw a headline that says no one wanted these Treasuries because of weak auction demand statistics. But at the end of the day, yields are still below overnight rates and the auctions generated still large bid-to-covers. They were not the best, but certainly we’re far off from concerns that demand is too weak.”
Data showed that Treasury’s two-year auction was not well-received, with the two-year yield hitting its highest since the first week of May after the sale. The high yield for the offering was 4.917 percent , higher than the expected rate at the bid deadline, suggesting buyers demanded a premium to take down the note.
The two-year note’s bid-to-cover ratio, a gauge of demand, was 2.41, lower than the 2.66 posted in April and the 2.70 average.
The five-year note auction, meanwhile, posted roughly the same soft results. The high yield was 4.553 percent , higher than expected, with the Treasury offering a more attractive rate to lure buyers. Its bid-to-cover was 2.30, lower than the 2.47 seen in the previous sale. It was the weakest bid-to-cover since Sept. 2022.
