Treasuries Under Pressure with Imminent Taper

by on December 12, 2013 9:17 pm GMT

Treasuries are under pressure again as positive US data signal an imminent threat of a taper from the Federal Reserve. “We had decent data this morning that has weighed on Treasuries, as it’s a positive for growth prospects and Fed tapering,” said Ira Jersey, an interest-rate strategist from Credit Suisse Group, one of the 21 primary treasury dealers.

5Y treasuries climbed to a three-month high, climbing three bps to 1.53 percent, while the Federal Reserve auctioned off 30Y treasury bonds at the highest yield point in two years. The 30Y treasury bond rose one bps to 3.90 percent after bouncing of 3.86. The long-dated bond did fall from its two-year high of 3.96 on December 6. Indirect bidders bought up 46 percent of the bonds at auction, which is the most since April 2011. The last 10 auctions only drew an average of 38.4 percent indirect buyers, which include foreign central banks.

The 10Y yield increase two bps to 2.88 percent and slowly hiking its way to three percent. The continued positive data, taper or no taper, will likely continue to pressure treasuries. Thomas Roth, senior treasury trader at Mitsubishi UFJ Securities, said “when things look like the economy is better than expected, that’s where the pain is going to be.”