Treasurys slip on more supply and Fed fears

Dees Illustration

NEW YORK — Treasury prices slid on Wednesday as the government pushed more bonds into the market and traders feared the Federal Reserve won’t buy as many bonds as they had hoped.

In its third bond auction this week, the Treasury sold $35 billion in five-year notes at a yield of 1.33 percent. That’s a slightly higher borrowing rate than what the government received in September’s sale of five-year notes.

The Treasury fared better in this week’s previous auctions, getting the cheapest rates on record for two-year notes and five-year inflation-protected bonds.

Buyers placed bids for 2.82 times the amount of five-year notes up for sale, the weakest show of demand in four months but still above the 12-month average.

Treasurys dipped early in the day after a story in the Wall Street Journal reported the Fed’s bond buying program may wind up smaller than many thought. The report said the Fed would likely target a few hundred billion dollars in Treasury bonds after its meeting Nov. 3. Wall Street economists and bond traders had expected much more. Estimates ranged from $500 million to more than $1 trillion.

The 10-year note lost 65.6 cents to $99.12. The drop pushed the yield from 2.64 percent Tuesday to 2.72 percent. Bond prices and yields move in opposite directions.

The 30-year long bond fell 96.8 cents to $96.87, raising the yield from 3.99 percent to 4.05 percent. The yield on the two-year inched up from 0.40 percent to 0.41 percent.

The last of this week’s auctions comes Thursday with the sale of $29 billion in seven-year notes. The Treasury expects to raise a total of $109 billion in this week’s four auctions.

In Treasury bill trading, the three-month T-bill paid a 0.13 percent yield at a 0.14 percent discount.