Treasuries drop after auction as stocks, oil erase early gains

Treasuries extended a third straight day of losses after a $24 billion auction of 10-year notes sold at a higher-than-forecast yield. U.S. stocks, the euro and oil erased early gains.

Ten-year U.S. note yields increased four basis points at 3:35 p.m. in New York, topping 2% for the first time in a week. The S&P 500 slipped 0.1% 1,518.16, reversing an early 0.4% advance and retreating from a five-year high, while the Europe Stoxx 600 Index closed 0.4% higher. The 17-nation euro currency depreciated less than 0.1% to $1.3450 after climbing as much as 0.5%. Oil slipped 0.5% to $97.01 a barrel after gaining 0.6%.

Earlier gains in stocks came as Comcast Corp.’s $16.7 billion purchase of the remainder of NBC Universal bolstered optimism in dealmaking, while government data showed retail sales increased in January for a third straight month. In his first State of the Union address last night, Obama called for a higher minimum wage, vowed to begin talks on a trade agreement with the European Union and spend $50 billion on “urgent” infrastructure projects.

“There doesn’t seem like a lot of appetite to add Treasury risk as the economy trends better and bearishness slowly fades,” Ira Jersey, an interest-rate strategist in New York at Credit Suisse Group AG, said before the sale. As a primary dealer, the firm is obliged to bid in U.S. debt auctions. “There is decent reason to think that we are going to have growth that is good enough to keep us at or above 2% for a while.”

Auction Results

The notes sold by the U.S. Treasury today drew a yield of 2.046%, compared with a forecast of 2.039% in a Bloomberg News survey of eight of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.68, vs. an average of 2.96 for the past 10 sales.

Industrial and consumer shares led gains among 10 groups in the S&P 500 while telephone, utility and financial companies declined. McDonald’s Corp. lost 1.4% to help lead the Dow Jones Industrial Average lower after Obama announced his plan to raise the minimum wage. Cliffs Natural Resources Inc. tumbled 20% after cutting its dividend.

General Electric Co. climbed 3.3% after agreeing to sell its remaining 49% stake in NBC Universal to Comcast, the largest U.S. cable company, for $16.7 billion. Comcast increased 3.4%.

The S&P 500 has risen to within 3% of its record of 1,565.15 reached in October 2007. It’s more than doubled from its bear-market low in 2009 as the nation emerged from the worst recession since the 1930s.

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