Treasuries fell, pushing 10-year yields to a two-week high, as investors sought higher-yielding assets and the Federal Open Market Committee began a two-day meeting amid forecasts it will decide to buy more bonds to spur the economy.
U.S. government debt declined even as the Treasury sold $32 billion in three-year securities at a record low yield of 0.327 percent. The auction was the first of three note and bond sales this week totaling $66 billion. Stocks rose as risk appetite gained amid signs Europe’s fiscal crisis may ease.
“The onset of supply is one factor, as is a positive move in the stock market,” said Dan Mulholland, head of U.S. Treasury trading in the capital-markets unit of BNY Mellon Corp. in New York. “The FOMC meeting is pretty critical.”
The benchmark 10-year note yield increased three basis points, or 0.03 percentage point, to 1.65 percent at 3:40 p.m. in New York, according to Bloomberg Bond Trader prices. It touched 1.66 percent, the highest level since Nov. 27. The price of the 1.625 percent security due in November 2022 declined 9/32, or $2.81 per $1,000 face amount, to 99 25/32.
The yield on the current three-year security rose as much as one basis point to 0.33 percent before trading little changed at 0.32 percent.
The Standard & Poor’s 500 Index climbed 1.1 percent after German investor confidence jumped and as Greece drew enough bonds to a sovereign-debt buyback crucial to unlocking aid from the International Monetary Fund. The index pared gains to 0.6 percent amid concern that a budget showdown in Washington may push the U.S. economy into recession.
The U.S. will auction $21 billion of 10-year notes tomorrow and $13 billion of 30-year bonds on Dec 13. The offerings will raise $25.7 billion of new cash as maturing securities held by the public total $40.2 billion, according to the Treasury.
At today’s three-year debt auction, direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, bought a record 24.8 percent of the notes. They purchased an average of 12.5 percent at the past 10 sales.
The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of notes offered, was 3.36, versus 3.41 at the last sale.