TREASURIES-Yields jump after record 30-year auction sees weak demand

 (Recasts with auction, adds quotes, updates prices)
    By Karen Brettell
    NEW YORK, Aug 13 (Reuters) - Benchmark U.S. Treasury yields
surged to seven-week highs on Thursday after the Treasury sold a
record amount of 30-year bonds to weak demand, the final sale of
$112 billion in new coupon-bearing supply this week.
    The Treasury sold $26 billion in bonds, up from $22 billion
at its last quarterly refunding in May.
    The debt sold at a high yield of 1.406%, around three basis
points higher than where the debt traded before the sale.
Primary dealers took a larger than average share of 28% of the
bonds, indicating tepid demand from investors. The bid-to-cover
ratio of 2.14 times was the lowest since July 2019.
    It was “definitely a weaker auction,” said Zach Griffiths,
an interest rate strategist at Wells Fargo in Charlotte, North
Carolina. “I think this auction today shows there is at least a
little bit of market indigestion with all of this new duration.”
    The Treasury last week increased auction sizes across the
curve and said that it plans to continue to shift more of its
funding to longer-dated debt in coming quarters as it finances
measures to offset the impact of the coronavirus epidemic.

    There was solid demand for a record $38 billion in 10-year
notes on Wednesday and a record $48 billion in three-year notes
on Tuesday. Both issues sold off in price before the auctions,
which made them more attractive.
    But a rise in 30-year yields before Thursday's auction was
not enough to lure strong interest.
    Thirty-year bond yields were last up six basis
points at 1.426%, after getting as high as 1.444%, the highest
since July 7. They have risen from 1.165% last Thursday, which
was the lowest since April 24.
    Ten-year yields were last at 0.718%, after
earlier reaching 0.727%, the highest since June 24. They are up
from 0.504% last Thursday, which was the lowest since March 9.
    The Treasury also said on Thursday that it will sell $25
billion in 20-year bonds on Wednesday, which is a $5 billion
increase over its initial offering in May.
    Data on Thursday showed that the number of Americans seeking
unemployment benefits dropped below 1 million last week for the
first time since the start of the COVID-19 pandemic in the
United States, likely as the expiration of a $600 weekly jobless
supplement discouraged some from filing claims.
    The next major U.S. economic focus is retail sales on
Friday. 
     
    August 13 Thursday 3:00PM New York / 1900 GMT
                               Price                  
 US T BONDS SEP0               177-24/32    -1-1/32   
 10YR TNotes SEP0              138-240/256  -0-64/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0975       0.0989    -0.007
 Six-month bills               0.12         0.1217    0.000
 Two-year note                 99-236/256   0.1649    0.006
 Three-year note               99-198/256   0.2009    0.013
 Five-year note                99-168/256   0.3199    0.024
 Seven-year note               99           0.5214    0.026
 10-year note                  99-28/256    0.7175    0.031
 20-year bond                  98-208/256   1.1926    0.057
 30-year bond                  95-188/256   1.4264    0.061
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.50         0.00    
 spread                                               
 U.S. 3-year dollar swap         5.75        -0.25    
 spread                                               
 U.S. 5-year dollar swap         4.00        -0.50    
 spread                                               
 U.S. 10-year dollar swap       -2.50        -1.75    
 spread                                               
 U.S. 30-year dollar swap      -41.50        -1.25    
 spread                                               
                                                      
 

    
    

 (Reporting by Karen Brettell; editing by Steve Orlofsky and
Jonathan Oatis)
  

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