U.S. 30-year bonds gain as dealers reduce offers and Fed buys

Italy’s Debt

Demand at Italy’s auction of 8 billion euros ($9.9 billion) of its Treasury bills rose above levels at last month’s offering, pulling down yields for its 10-year notes as well.

Italy’s 10-year bonds advanced after the nation auctioned 8 billion euros of the one-year securities today. Investors bid for 1.69 times the amount of bills sold, up from 1.55 times at a sale last month. Germany sold 3.8 billion euros six-month bills at a record-low yield.

There’s been “a tightening of European peripherals on the bill auction,” said Justin Lederer, an interest-rate strategist at Cantor Fitzgerald LP in New York, a primary dealer. “That’s where the small amount of pressure on Treasuries has come from.”

Italy’s 10-year yield slipped as much as six basis points to 5.84 percent. The rate on similar-maturity Spanish bonds dropped seven basis points to 6.84 percent.

European Debt

Spanish and Italian bonds rose and the euro gained earlier this month after ECB President Mario Draghi said the Frankfurt- based central bank may buy government debt in conjunction with euro-area bailout funds. The ECB later said it may take such measures only if troubled nations commit to improving their economies and fiscal positions.

The U.S. added 163,000 jobs in July, a government report showed Aug. 3, more than the 100,000 projected by analysts. Sales at U.S. retailers increased 0.3 percent last month, following a 0.5 percent slide in June, according to a Bloomberg survey of economists before tomorrow’s Commerce Department data.

The Labor Department will likely report Aug. 15 that consumer prices rose 1.6 percent for the 12 months through July, according to the median forecast of 39 economists in a Bloomberg News survey.

“We have this sell-off in equities that’s getting people nervous,” said Ira Jersey, an interest-rate strategist at primary dealer Credit Suisse Group AG in New York. “This is happening as we’re getting a sell-off in commodities. One thing that that’s pointing to is the potential for lower headline inflation going forward.”

Japan’s gross domestic product increased an annualized 1.4 percent in the three months through June 30, compared with a revised 5.5 percent in the first quarter, the Cabinet Office said in Tokyo today. A Bloomberg News survey of economists projected 2.3 percent.

GDP in the euro area probably shrank 0.4 percent in the second quarter from a year earlier, another survey showed.

Bloomberg News

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