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Government Bonds Fall Ahead of Treasury Auction

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10/09/2019 | 12:59pm EDT

By Daniel Kruger

U.S. government bond prices fell Wednesday ahead of the second of three auctions of Treasury debt this week.

The yield on the benchmark 10-year Treasury note rose to a recent 1.573%, according to Tradeweb, compared with 1.532% Tuesday.

Yields, which rise when bond prices decline, climbed after investors pared bets on Treasury debt after the securities gained Tuesday for the eighth time in the past nine sessions. The government is selling $24 billion 19-year notes Wednesday.

The majority of the demand at the auction could come from U.S. mutual funds after they purchased more than 60% of the August offering of those securities, the largest share of a 10-year note auction on record, said Benjamin Jeffrey, an interest-rates strategist at BMO Capital Markets.

U.S. mutual-fund investors are on track to buy the biggest share of Treasury auctions this year, according to government data, at the same time yields on U.S. government debt have declined to multiyear lows.

Investors have sought safe assets amid signs that economic growth around the world and the in the U.S. has slowed, hindered by trade conflicts between the U.S. and China. While the unemployment rate fell last month to its lowest rate in almost 50 years, the pace of job gains has slowed this year. There are also signs that activity in both the manufacturing and services sectors is decelerating. Some investors have said they expect Treasury yields to fall to record lows should economic output continue to slow.

The Federal Reserve has cut interest rates twice this year to help sustain the pace of growth against the risk that a reduction in global trade will lead to slower growth in the U.S. Investors widely expect that the Fed will cut rates for a third time at its meeting later this month.

"The factors that have driven yields to these levels haven't gone away, but rather have only intensified," Mr. Jeffrey said.

The WSJ Dollar Index rose less than 0.1% to a recent 91.91 after rising versus the Japanese yen and the British pound, while slipping against the euro.

Write to Daniel Kruger at Daniel.Kruger@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
EURO / BRITISH POUND (EUR/GBP) 0.04% 0.87447 Delayed Quote.-1.50%
EURO / US DOLLAR (EUR/USD) 0.01% 1.1027 Delayed Quote.-3.99%
US DOLLAR INDEX 0.18% 98.48 End-of-day quote.1.86%
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