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3 Minutes to Read (Reuters) – CHICAGO, July 8 (Reuters) – Analysts said on Thursday that rising Treasury prices, which have pushed rates to five-month lows, could put a damper on demand for $62 billion in longer-term government debt expected to be auctioned next week. On Monday, $38 billion in 10-year notes will be sold, followed by $24 billion in 30-year bonds on Tuesday, after a two-week dearth in coupon supplies. The auctions come as rates have fallen to levels last seen in February, with the benchmark 10-year yield hitting a session low of 1.25 percent on Thursday and the 30-year yield hitting a session low of 1.856 percent. After a “almost insatiable” length bid by investors for longer-term debt over the last couple of weeks, Zachary Griffiths, macro analyst at Wells Fargo, said current yields, which are at “much-less appealing levels” than during June auctions, could offer a headwind for demand. “I don’t think we’re ready to declare that next week’s auctions will go badly just because of the move in absolute yield levels,” he added, “but it might be a gut check for where demand stands at these much-lower yields.” High yields of 1.497 percent for 10-year notes and 2.172 percent for 30-year bonds were achieved in June auctions. According to John Canavan, lead analyst at Oxford Economics, investors will show up for the new offers, but they may be looking for a bit higher yield, resulting in larger-than-usual tails, which is the difference between the auction yield and the prevailing “when issued” market yield for the debt. “There is obviously interest at current levels,” he added, “but we may want a little bit more of a concession simply because we believe an overbought long end will necessitate slightly higher yields to be pulled down.” Canavan also mentioned that overseas demand could dwindle a little, citing some reluctance on the part of Asian investors following recent gains in the United States. The release of US consumer price index data on Tuesday, just prior of the 30-year bond auction, could influence that offering. A strong positive surprise, according to Canavan, would necessitate a little more of a concession, whereas a significant downside surprise might encourage better demand. “Given the ongoing concerns about where global growth will go, given the persistent rise in coronavirus cases in many parts of the world, particularly with the Delta strain,” he added, “I believe the safe-haven demand for Treasuries will remain with us for the foreseeable future.” Karen Pierog contributed reporting, while Alden Bentley and Dan Grebler edited the piece./nRead More

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