By Sam Goldfarb
U.S. government bonds climbed Wednesday after a sale of 10-year notes attracted strong demand.
The $20 billion in new notes were sold at a 2.342% yield, eliciting $2.58 in bids for each dollar offered, the highest ratio for a 10-year auction since June. Indirect bidding, a proxy of foreign demand, was 70.5%, the highest since August.
The outcome of the auction sent the yield on the benchmark 10-year Treasury note down to 2.339% in recent trading, according to Tradeweb, down from 2.358% before the auction results were released and 2.379% Tuesday. Yields fall when bond prices rise.
Treasurys were already strongerheading into the auction, benefiting from a shift away from stocks during President-elect Donald Trump's press conference earlier in the day.
The 10-year auction was the latest sign of the building appetite for government debt in recent weeks after one of the biggest selloffs since the financial crisis. It followed a $24 billion sale of three-year notes Tuesday that also drew healthy interest from investors.
In the weeks after the November election, Treasury yields soared as investors bet that Mr. Trump and a Republican-controlled Congress would increase the budget deficit by cutting taxes and boosting spending on infrastructure -- policies that could diminish the value of outstanding government debt by adding to the supply of bonds and stoking inflation.
More recently, though, bond prices have crept upward as some investors bet that the selloff may have been overdone.
Bond prices dropped on Friday after the latest jobs report showed solid wage gains, a possible sign of broader inflation, which chips away at the fixed-rate returns of bonds. But prices recovered Monday and have been flat for most of the week.
"It feels like the market is consolidating," said John Briggs, head of strategy for Americas at NatWest Markets. After digesting major economic reports last week, there has been little for traders to react to this week, although that could change Friday with the release of retail sales data, he added.
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(END) Dow Jones Newswires
January 11, 2017 14:18 ET (19:18 GMT)
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