10-year Treasury yield climbs above 2.41%
Treasury yields saw prices slips, pushing yields slightly higher Wednesday, after a lackluster auction of 10-year notes weighed on U.S. government paper, outweighing a resurgence of geopolitical risk amid the White House's unexpected dismissal of Federal Bureau of Investigation Director James Comey.
A weak auction for $24 billion of 10-year Treasury notes pushed yields higher, one of many sales in an active week for the Treasury Department, as it puts $189 billion of U.S. government paper on the block. Auctions of Treasury notes can influence trading for the outstanding market.
The so-called bid-to-cover ratio was 2.33, below the 12-month average of 2.47. A higher number usually indicates strong demand.
The yield for the 10-year note ticked up 0.9 basis point to 2.414%, notching a new eight-week high. Bond prices move inversely to yields; one basis point is one hundredth of a percentage point.
The tepid auction helped reverse an earlier fall in yields on heightened geopolitical concerns. President Donald Trump fired Comey late Tuesday on concerns he was "not able to effectively lead the bureau," the president wrote in a letter. Comey's ouster, which drew a swift rebuke from Democrats and some GOP members, has helped to remind investors of the uncertainty that has come to be a signature of the Trump administration, reviving questions about the commander-in-chief's ability to reach across the aisle and guide his ambitious legislative agenda into reality. The firing of the FBI director raised eyebrows, particularly as it came as the agency was investigating ties between Russia and Trump staffers during his presidential campaign.
"This news has reminded the street that the current political environment in the U.S. is unpredictable and that being complacent is dangerous," said Colin Cieszynski, chief market strategist for CMC markets, in a note.
In other Treasury notes, trading was mostly muted. The yield for the 2-year note gained 0.1 basis point to 1.355%, enough to extend its six-day streak of gains. While the 30-year bond edged up 0.4 basis point to 3.042%.
See: Trump fires FBI Director Comey; Democrats call for special prosecutor in Russia probe (http://www.marketwatch.com/story/trump-fires-fbi-director-comey-democrats-call-for-special-prosecutor-in-russia-probe-2017-05-09)
Before the news from Washington, the North Korean ambassador to the U.K. said the country would go ahead with its sixth nuclear test, in an interview with Sky News (http://news.sky.com/story/north-korea-not-afraid-as-it-plans-new-nuclear-test-says-ambassador-in-uk-10870570), heightening tensions in the Korean Peninsula. South Korea's benchmark equity gauge, the KOSPI composite index fell 0.99% to 2270.12 on Wednesday. Both geopolitical flashpoints had led investors to turn to assets perceived as safe like gold in overnight trading. However, those trades receded later in the day.
Meanwhile, Boston Fed President Eric Rosengren, a nonvoting member of the Fed, said the central bank should raise interest rates three more times this year and gradually reduce the $4.5 trillion balance sheet after the next rate increase.
Rosengren's comments on Wednesday follow similar remarks he made a day ago, after he said the Fed should begin retrench the balance sheet "relatively soon," but the process should be "highly tapered" to give investors the time to get accustomed to a less active Fed. The Fed's efforts to shrink the balance sheet would take away a large buyer of Treasurys and result in a tightening of interest rates.
(END) Dow Jones Newswires
May 10, 2017 16:45 ET (20:45 GMT)