TREASURIES-U.S. yields fall as focus turns to auctions

Yoruk Bahceli and Abhinav Ramnarayan
·1 min read

By Yoruk Bahceli and Abhinav Ramnarayan

March 9 (Reuters) - U.S. Treasury yields fell in London morning trade on Tuesday, recovering from a hefty sell-off a day earlier that pushed benchmark yields near 13-month highs.

At 1048 GMT, U.S. 10-year yields were down 6 basis points to 1.54%, after rising to 1.613% on Monday, just below their recent peak at the highest since February 2020.

"It's possible that this is a short squeeze on Treasuries going into a key auction," said ING senior rates strategist Antoine Bouvet.

"To some extent it is also a relief rally after a long spell of volatility we have had in bonds in recent weeks."

Following a surge in short positions, the cost of borrowing 10-year U.S. Treasuries in the repurchase agreement market turned negative in recent sessions and had remained that way on Monday.

Focus turns to $120 billion of bond issuance by the U.S Treasury, starting with a three-year auction on Tuesday. The auctions will be closely watched to evaluate demand for the debt, after recent auctions saw weak demand, pushing yields higher.

But the so-called "belly" of the curve continued to underperform on Tuesday. After five-year yields rose more than longer-dated peers on Monday, they recovered less on Tuesday, down just 3 bps to 0.82%.

"We would argue that (the rise in five-year yields) will be a higher area of concern for the Fed than the increase in yields in the 10-year space, as it is more reflective of expectations about their policy rate," Rabobank analysts led by Richard McGuire told clients. (Reporting by Yoruk Bahceli and Abhinav Ramnarayan; Editing by Alex Richardson)