Treasury 10-Year Notes Auctioned Off Before Fed’s Policy Remarks

Jacob Harper |

Bernanke

Treasury 10-Year Notes Drop Before Fed’s Policy Remarks Just prior to the anticipated remarks from the Federal Reserve concerning the future of the federal bond buying program, the Treasury auctioned off over $21 billion in 10-year notes. Bidders ecstatically gobbled up the notes, buying them at 2.67 percent yield, the highest its been since July 2011.

The volatility plays in line with general cloudiness among investors concerning the market. Sean Murphy, a trader in New York at Societe Generale SA, said “We’ve been trading along these low 2.6 percent levels -- there’s a little bit of uncertainty to the direction, given the 10-year supply versus Bernanke.” This echoes general sentiments among bond buyers that there is a lack of stability or assurance that stability is coming.

Until investors are more confident concerning the level of involvement the Fed will have, the gap between yields and maturities continues to widen. This gap, the ‘butterfly spread,’ is at 1.25 percent, its highest level since June 2011. Higher bond yields mean lower prices, so it’s no surprise investors have jumped at the auction.

Lowering unemployment numbers announced on July 3 sent Treasury yields up, as speculation simultaneously increased that the Fed will indeed taper bond purchases beginning in September. Fed policy changes would add more volatility to the already fluctuating market.

The popular ETF iShares 20+ Year Treasury Bond (TLT) reflected this volatility. It’s down .88 percent to hit $106.44 a share, and down 3.23 percent on the week.

July 9 saw a $32 billion auction of three year notes. The 30 year note auction occurs on July 11.

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