By Karen Brettell
US Treasury yields rose on Wednesday as the Treasury Department sold long-dated supply and data showed a widening US budget deficit.
That overturned an earlier drop in yields after consumer price inflation data for November reinforced bets the Federal Reserve will cut rates by 25 basis points next week.
Longer-term debt concerns were seen weighing on the market after the US government posted a $367 billion budget deficit for November, up 17 percent from a year earlier.
“Not only does today’s report from the Treasury confirm that we’ve borrowed $624 billion so far this fiscal year – $10 billion per day – but on a rolling basis, we’ve borrowed $2.1 trillion in the last twelve months. That’s an astonishing sum especially when considering the huge challenges ahead,” the Committee for a Responsible Federal Budget said in a release.
The Treasury Department earlier saw good demand for a $39 billion sale of 10-year notes, the second sale of $119 billion in coupon-bearing sales this week.
The debt sold at a high yield of 4.235 percent, more than a basis point below where they had traded before the sale. Demand was 2.70 times the amount of debt on offer, the highest bid to cover ratio since at least March 2022.
The US government saw solid demand for a $58 auction of three-year notes on Tuesday and will also sell $22 billion in 30-year bonds on Thursday.
Benchmark 10-year note yields were last up 5 basis points on the day at 4.271 percent.
Interest rate sensitive two-year note yields rose 1 basis points to 4.159 percent.
The yield curve between two-year and 10-year notes steepened by around three basis points to 11.3 basis points.
Yields fell earlier after data showed that both headline and core consumer inflation rose by 0.3 percent in November, in line with economists’ expectations, keeping the Fed on track for another interest rate cut. – Reuters
