Treasury bonds rose for a second day as signs of tepid U.S. economic growth and the biggest yield premiums over European debt in more than a decade bolstered demand at the government's $16 billion sale of the securities.
The longest-maturity U.S. government debt was sold at the lowest yield since May 2013. The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.60, compared with an average of 2.40 at the past 10 sales. Yields fell prior to the auction after a report showed weekly unemployment claims rose more than forecast. Economists reduced year-end forecasts for the benchmark 10-year note to below 3% for the first time in more than a year.
“It was a very successful auction,” said William Larkin, a money manager who oversees $520 million in assets at Cabot Money Management. “The market is pushing out expectations that the Fed is going to raise rates into the second half of next year, which is allowing the long end to run a little bit longer.”
The long bonds sold at the auction yielded 3.224%.
The 30-year bond auction was the final of three note and bond offerings this week. The U.S. sold $27 billion of three-year debt on Aug. 12 at a yield of 0.924% and auctioned $24 billion of 10-year debt Wednesday at a yield of 2.439%.
The long bond has returned 16% this year through Wednesday, the most in the period since 2010, versus a gain of 3.8% by the broader U.S. Treasuries market, according to Bank of America Merrill Lynch indexes. Thirty-year securities lost 15% in 2013, versus a 3.4% decline by Treasuries overall.
The 10-year note yield will end 2014 at 2.92%, according to the median forecast of economists surveyed by Bloomberg from Aug. 8-13. It was the first time the projection was below 3% since May 2013. The estimate was 3.44% in January.