May 14, 2015 / 1:46 PM / 2 years ago

TREASURIES-Yields fall as corporate supply eases, German debt steadies

By Karen Brettell
    NEW YORK, May 14 (Reuters) - U.S. Treasury yields fell on
Thursday as some corporate debt issuance that has weighed on the
market passed and as German government bonds held relatively
steady, after a dramatic two-and-a-half week selloff.
    U.S. government bond yields have been dragged higher by
weakening German Bunds, which have been roiled by factors
including a rapid unwinding of bets placed on the European
Central Bank's debt purchase program.
    "Trading is calming down in Europe," said Jim Vogel, an
interest rate strategist at FTN Financial in Memphis, Tennessee.
"Yields still aren't improving, but the frenzy is less, so that
helps Treasuries disconnect from the sharp rise in Europe."
    Benchmark 10-year note yields fell to 2.26
percent from 2.27 percent late on Wednesday.
    Large corporate debt sales from companies including Qualcomm
 and new U.S. Treasury issuance have also pushed yields
higher. The government will sell $16 billion in new 30-year
bonds later on Thursday, the final sale of $64 billion in new
supply this week.
    Higher yields and a steeper yield curve may help draw buyers
to the bonds, after strong demand at Wednesday's $24 billion
sale of 10-year notes.
    Demand for long-dated debt can be uneven, however, and
investors may be wary if they think the yield curve may steepen
further.
    "It's a question in a steepening environment, even though
30s are cheaper, whether people are going to want to pile in
right now," said Vogel.
    The yield curve between five-year and 30-year bonds
 steepened to 153 basis points on Thursday. It has
risen from 130 basis points at the end of April and from a low
of 101 basis points in February.
    Data on Thursday also showed U.S. producer prices resumed
their downward trend in April as the cost of energy fell and a
strong dollar kept underlying inflation pressures benign,
supporting views that the Federal Reserve will only raise
interest rates later in the year. 

 (Editing by Lisa Von Ahn)

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