September 12, 2017 / 8:02 PM / 11 days ago

TREASURIES-Long-dated yields rise after soft U.S. 10-year auction

* U.S. 10-year note auction shows sluggish demand

* 10-year yield at auction was lowest since November

* U.S. bank analyst says market unwinding safe-haven trades (Adds fresh comment, auction results, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 12 (Reuters) - U.S. long-dated Treasury yields rose for a third straight session as tepid demand for benchmark 10-year notes pressured overall bond prices.

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’s $20 billion sale of 10-year notes showed weak demand from investors despite being sold off sharply going into the auction. The yield was 2.18 percent, which was higher than that expected at the bid deadline but the lowest since November.

Bids totaled nearly $45.7 billion for a 2.28 bid-to-cover ratio, slightly better than last month’s 2.23 but below the average of 2.42. Indirect bidders, which include foreign central banks, took 55.3 percent, below the 57.9 percent last month.

After the auction, U.S. 10-year yields, which move inversely to prices, matched a high hit two weeks ago, while 30-year bonds touched three-week peaks.

The 10-year note auction’s lukewarm result was expected, analysts said, given how much rates have declined in the past week. Over the last two weeks, 10-year yields have fallen about 10 basis points.

The Treasury will next sell $12 billion in 30-year bonds on Wednesday.

Meanwhile, the market has unwound safe-haven trades that saw U.S. 10-year note yields nearly take out the 2 percent technical level last week.

“We’ve had short-term situations that have induced investors to seek more safe-haven assets,” said Bill Merz, head of fixed-income research at U.S. Bank Wealth Management in Minneapolis.

“We had North Korea, the hurricanes, natural disasters, and issues on the debt ceiling. That reached relative extreme last week and we’re seeing a bit of an unwind to that and rightfully so,” he added.

In late trading, benchmark 10-year Treasury yields rose to 2.17 percent, from 2.125 percent late on Monday. Ten-year yields had hit 2.18 percent, a three-week high, following the 10-year auction.

U.S. 30-year bond yields rose to 2.775 percent, up from 2.739 percent in the previous session. Thirty-year yields also climbed to three-week peaks of 2.788 percent.

Yields also benefited from U.S. Treasury Secretary Steven Mnuchin’s comments on Tuesday reaffirming the Trump administration’s commitment to tax reform, analysts said.

Mnuchin told a conference hosted by CNBC that lowering the corporate tax rate to 15 percent, an idea backed by President Donald Trump, may not be possible, but that businesses will see a “competitive” rate as Republicans push their plan through Congress. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith Mazzilli and Paul Simao)

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