By Deborah Levine
Treasurys prices declined Thursday, sending yields higher for a
fourth consecutive session, as the government got ready to sell $22
billion in 7-year notes, the last of three record-sized note
auctions conducted this week.
Growing government-debt issuance is in sharp focus as President
Barack Obama released his first budget amid plans to come to grips
with a yawning federal deficit.
Short-term U.S. debt pared their declines, however, as a pair of
economic reports indicated an even weaker-than-expected labor
market and as well as declining orders for manufactured goods.
Ten-year note yields (UST10Y) rose 5 basis points, or 0.05%, to
stand at 2.98%. Yields earlier had topped 3% for the first time
since Feb. 9.
Two-year note yields (UST2YR) also increased, up 2 basis points
to 1.11%.
Bond prices move inversely to their yields.
The sale of 7-year notes is the first offering of the maturity
since 1993. It's part of the Treasury Department's plan to increase
bond issuance to finance all of the programs and stimulus enacted
by the Federal Reserve and Congress in the hopes of stabilizing
financial markets and helping bring the recession to an end.
On Tuesday, the Treasury sold $40 billion in two-year notes,
followed by $32 billion in five-year notes on Wednesday. Both sales
received decent overall demand from investors but failed to inspire
a rebound for the broader market.
On the data front, first-time applications for state
unemployment benefits rose 36,000 last week, reaching a seasonally
adjusted 667,000, the highest since October 1982. And for the week
ended Feb. 14, the number of people collecting benefits climbed to
a record 5.11 million, the Labor Department reported.
"The unemployment claims data are indicating a significant
pickup in the pace of job loss in February and a further rise in
the unemployment rate," said economists at RDQ Economics.
Theyexpect the government employment report for February, to be
released next week, to show that the economy lost 750,000 jobs.
Separately, orders for durable goods fell a more-than-predicted
5.2% in January, extending their recent string. Orders had never
fallen six months in a row since the Commerce Department began
collecting this data in 1992.
Also Thursday, sales of new homes fell 10.2% in January to a
record low, data showed. The Commerce Department said sales fell to
seasonally adjusted annual rate of 309,000, worse than economists
anticipated.
The weak data aren't helping bonds, and any rise in equities has
pressured fixed-income though weaker stocks have not helped
recently, said strategists at RBS Greenwich Capital.
"It's possible that the market has reached the point where there
is more supply than demand all other things being equal," they
wrote in an email.
GM's bonds in spotlight
In corporate-bond activity, General Motor Corp.'s bonds held up
after the embattled automaker (GM) said it lost $9.6 billion in the
forth quarter and burned through $6.2 billion in cash.
GM's 7.125% bonds maturing in 2013 were trading around 15 cents
on the dollar on Thursday, unchanged from Wednesday, according to
KDP Advisors. The bonds fell to as low as 13 cents earlier in the
month.
Companies have seen plenty of demand for new sales of debt this
month. Investors have been attracted to relatively high yields that
offer what many fund managers consider returns similar to equities
in an average year -- and far better than equities have performed
lately.
February is, so far, the third-busiest month on record for the
issuance of corporate bonds, according to Dealogic.