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Latest 30YR Treasury Bond Auction

May 7 (Bloomberg) -- Treasuries extended losses as the government’s auction of $14 billion of 30-year bonds drew a yield that was higher than dealers anticipated.

The bonds yielded 4.288 percent, compared with the average forecast in a Bloomberg News survey of seven bond-trading firms for a yield of 4.192 percent. Demand was below average, judging by total bids. Treasuries declined earlier as speculation increased that U.S. banks are strong enough to weather the recession and a report showed jobless claims unexpectedly fell.

The benchmark 30-year bond yield climbed 17 basis points, or 0.17 percentage point, to 4.26 percent at 1:05 p.m. in New York, according to BGCantor Market data. The 3.5 percent security due in February 2039 tumbled 2 21/32, or $26.56 per $1,000 face amount, to 87 7/32. The 10-year note yield increased 11 basis points to 3.30 percent.

The auction’s so-called bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.14, compared with an average of 2.24 at the past 10 sales of the maturity. Thirty-year bonds yielded 3.64 percent at the last sale, on March 12. Indirect bidders, a group of investors that includes foreign central banks, bought 33% of the auction, compared with 35.3% on average at the last four

Today’s auction began the Treasury’s monthly sales of the so-called long bond, up from quarterly offerings at the end of last year. That means the government will boost sales of the security from $35 billion in 2008 to $120 billion this year, according to Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc., one of the 16 primary dealers that trade with the central bank and are required to participate in Treasury auctions.

The yield on the benchmark 30-year bond earlier reached 4.1844 percent today, the most since Nov. 18, while the 10-year yield touched 3.2670 percent, the highest since Nov. 25.

“Treasuries are getting more attractive here,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. If 10-year note yields rose to 3.3750 percent, it would be “a good entry point for a short-term trade,” he said.

The story out of China “is partially responsible for the selling pressure in Treasuries,” wrote Ian Lyngen, an interest- rate strategist in Greenwich, Connecticut, at RBS Securities Inc., in a note to clients today. The firm is a primary dealer.

The difference between rates on 10-year notes and Treasury Inflation Protected Securities, which reflects the outlook among traders for consumer prices over the next decade, widened to 1.56 percentage points from near zero at the end of last year. It’s below the five-year average of 2.24 percentage points.