September 12, 2017 / 2:31 PM / 12 days ago

TREASURIES-Long-dated yields hit 2-week highs ahead of U.S. 10-year auction

NEW YORK, Sept 12 (Reuters) - U.S. long-dated Treasury yields hit two-week highs on Tuesday, rising for a third straight session amid a respite in geopolitical tensions in North Korea, with investors bracing for a 10-year note auction later in the session.

Investors typically sell Treasuries ahead of an auction to push the yield higher so they can buy them at a lower price in a practice called concession.

The Treasury will auction $20 billion in 10-year notes later on Tuesday and $12 billion in 30-year bonds on Wednesday.

“The market is now realizing that we still have supply and there are concessions needed to clear this market,” said Gennadiy Goldberg, interest rates strategist at TD Securities in New York.

“To some extent, the market overshot the mark. Rates should not have declined to the low 2 percent (on the 10-year). It was more fear-driven more than anything else,” he added.

The fact that there has been no escalation in tensions with North Korea so far has also propped up yields, analysts said.

In mid-morning trading, benchmark 10-year Treasury yields rose to 2.167 percent, from 2.125 percent late on Monday. Ten-year yields earlier hit 2.169 percent, a two-week high.

Recent 10-year auctions have seen soft demand and Tuesday’s auction could be no different.

“We’re still 10 basis points lower than the auction’s yield in August. There is a little bit more room for rates to rise to clear the market,” TD’s Goldberg said.

“Unless we continue to have strong concession throughout the day, I don’t think the auction will be fantastic. We can expect a small tail here,” he added.

The “tail,” which suggests weak demand, refers to the difference between the highest yield on the Treasuries during the auction and the expected high yield when the sale starts.

U.S. 30-year bond yields rose to 2.772 percent, up from 2.739 percent the previous session. Thirty-year yields also climbed to two-week peaks of 2.774 percent. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith Mazzilli)

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