* Profit-taking seen at long end
* Shorter maturities also off
By Michael Connor
NEW YORK, May 9 (Reuters) - U.S. Treasuries drifted lower on Friday as the 30-year long bond again surrendered price gains following an unexpectedly costly $16 billion government auction of new 30-year debt.
Yields on 30-year Treasuries, which have been favored in recent months by pension fund buyers, stood at 3.44 percent, reflecting a price decline of 8/32 on Friday.
A week ago, the yields on 30-year bonds touched a low of 3.34 percent that had not been seen since June 19 last year.
“There’s a little bit of profit-taking,” said Kim Rupert, managing director at Action Economics in San Francisco. “The 30-year is near its most expensive for the year, and there’s probably overhang from yesterday’s auction. That was a little sour.”
Thursday’s 30-year auction, the last of three this week by the Treasury Department selling $69 billion of new debt, came with a high yield of 3.440 percent.
Demand paled compared with recent auctions and suggested some recent buyers had stayed on the sidelines, according to analysts.
“The bid/cover ratio measured just 2.09 in comparison to the six auction average of 2.41 (in fact, May’s bid/cover was the lowest since 2011),” Janney Capital Markets analyst Guy LeBas said in a commentary. “It seems that we’ve finally found a level at which the demand for duration is fading.”
That 3.440 percent high yield was more than two basis points more than the market level signaled just before the auction and drove selling of 30-year bonds even as other Treasury maturities rose or steadied. The 30-year fell 4/32 in price on Thursday.
On Friday, other Treasuries were mostly down or flat in price. Ten-year Treasury notes yielded 2.6179 percent, reflecting a price decline of 4/32.
Thirty-year Treasuries have risen sharply this year, in part on reported buying by pension funds that seemed indifferent to price increases. (Reporting By Michael Connor in New York; Editing by Peter Galloway)