Weak auction of 30-year bonds sends Treasurys down

NEW YORK — Treasury prices tumbled Thursday after an auction of $12 billion of 30-year bonds was met with lukewarm demand.

In late trading, the price of the 30-year Treasury dropped 1 15/32 to 107 3/32, pushing its yield up to 4.09 percent from 4.01 percent late Wednesday.

The auction’s bid-to-cover ratio, a measure of demand, was 2.37, down from 2.92 at a similar auction last month. The number of indirect bidders, an indication of foreign demand, was also less than in previous auctions.

Christopher Garman, president of Garman Research, said a steady decline in yields on long-term Treasurys since August has made them less attractive. As stocks and commodities continue to surge, riskier investments are a potentially more lucrative bet.

“With risky assets performing as well as they have been … investors are looking for a little bit more yield from the risk-free Treasury bond market,” Garman said.

The auction Thursday was the third and final auction of the week. Earlier this week, auctions of $39 billion of three-year notes and $20 billion of 10-year notes were met with more solid demand.

A rally in stocks also hurt demand for Treasurys Thursday. Major stock indexes rose more than 0.5 percent as investors cheered upbeat retail sales reports and a surprising profit from Alcoa Inc. late Wednesday. Demand for the safety of government debt tends to wane when stocks rise.

In other trading, the price of the 10-year Treasury note fell 18/32 to 103 4/32. Its yield rose to 3.25 percent from 3.19 percent.

The two-year note fell 1/32 to 100 7/32 and its yield rose to 0.89 percent from 0.87 percent.

The yield on the three-month T-bill rose to 0.06 percent from 0.05 percent. Its discount rate was 0.07 percent.

The cost of borrowing between banks remained unchanged. The British Bankers’ Association said the rate on three-month loans in dollars — the London Interbank Offered Rate, or Libor — was flat at 0.28 percent.