November 12, 2009 / 6:50 PM / in 8 years

U.S. 30-year bonds get cold shoulder, market falls

NEW YORK, Nov 12 (Reuters) - The record $16 billion sale of U.S. 30-year government bonds got a cool reception from investors on Thursday, sparking a selloff in the Treasury debt market.

Investors’ reticence at the last leg of this week’s $81 billion federal debt refunding was a surprise after they gave a warm response at the three-year and 10-year note auctions earlier this week.

“Poorly received,” Lou Brien, market strategist with DRW Trading in Chicago, said of the latest auction.

Overall bidding for the new 30-year bonds was the lowest since May, while the yield cleared at 4.469 percent, more than 3.5 basis points higher than traders had expected. For details, see [ID:nTAR000488]

Moreover, indirect bidders, which include foreign central banks, came in at 44 percent, slightly below the recent average, according to analysts.

The weak auction results triggered selling of 30-year Treasuries in the open market. The 30-year bond briefly lost more than a point, sending the yield to a session high of 4.48 percent, a level not seen since mid-August. [ID:nNYD001586]

Despite the disappointing 30-year auction, analysts handed out a good grade for the November refunding.

It raised roughly $43 billion in new cash to help the U.S. government pay for its stimulus program and financial bailouts. The Treasury has faced a drop in tax receipts due to the recession. [ID:nN04347885]

“Overall it was a decent affair. There were no significant cracks with the paper subscribed,” said George Goncalves, head of fixed income rates strategy at Cantor Fitzgerald in New York. (Reporting by Richard Leong; Editing by Kenneth Barry)

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