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US DOLLAR INDEX

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U.S. Government Bonds Decline as Treasury Auctions New Debt

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09/10/2019 | 03:55pm EDT

By Daniel Kruger

U.S. government-bond prices fell anew Tuesday, with the Treasury Department and a crowded slate of corporate issuers adding to the supply of fresh debt.

The yield on the benchmark 10-year Treasury note rose for a second consecutive trading session, settling at 1.706%, compared with 1.632% Monday. The yield has risen one-quarter of a percentage point since reaching a three-year low last Wednesday.

Yields, which rise as bond prices fall, climbed ahead of the Treasury's sale of $38 billion of three-year notes scheduled for Tuesday afternoon. The government is scheduled to sell 10-year notes Wednesday and 30-year bonds Thursday. Analysts said demand at the auction was tepid and suggested investors may be waiting to buy the longer-term securities, whose yields are now more attractive than they were a week ago.

Those auctions are poised to join this month's wave of corporate issuance. Companies seeking to refinance debt to take advantage of this year's fall in bond yields have intensified the usual September rush to sell bonds after the summer holidays.

Investors often sell government debt to make room in their portfolios to purchase higher-yielding corporate bonds, or in anticipation of the Treasury's auctions, which frequently are sold at slightly higher yields than are available in earlier trading. Issuers Tuesday included Vodafone Group PLC and Penske Truck Leasing Co.

The corporate bond sales reflect prudent debt management, said John Lloyd, co-head of global credit research at Janus Henderson, with companies refinancing debt acting like homeowners who refinancing mortgages when interest rates fall. "It's a natural reaction," he said.

The rise in yields may also reflect signs of recent planning for next month's trade talks between the U.S. and China, some investors said. While there is little optimism that those negotiations will bring about a sharp change, some investors are cheered by the relative progress being made on trade talks and the lack of attention the talks have received from President Trump, investors said.

"The fact that it's been all quiet on the trade front has been reassuring," said Don Ellenberger, head of multisector strategies at Federated Investors. "Just the fact that [President Trump] hasn't tweeted anything" has calmed investors and damped volatility, he said.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, recently rose less than 0.1% to 91.32.

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

Stocks mentioned in the article
ChangeLast1st jan.
EURO / US DOLLAR (EUR/USD) -0.07% 1.10668 Delayed Quote.-4.05%
FEDERATED INVESTORS INC -1.34% 32.41 Delayed Quote.22.07%
JANUS HENDERSON GROUP PLC 0.00% 21.95 Delayed Quote.5.94%
US DOLLAR INDEX -0.35% 98.26 End-of-day quote.1.63%
VODAFONE GROUP PLC -1.74% 157.1 Delayed Quote.2.75%
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