Money world

U.S. Treasury debt prices retreated Thursday as a stock market rally drew investors away from safe-haven government debt.

A little price-cutting ahead of next week’s new supply also put Treasurys on the defensive. The Treasury announced a record large $123 billion of coupon sales for next week, surpassing the previous weekly record of $115 billion seen in July.

U.S. stocks closed higher on Thursday on a batch of strong earnings from various sector bellwethers, with financial and consumer stocks leading the way.

The earnings improvements in those sectors offered hope that both the banking sector and a consumer-driven economy were starting to recover, developments that would lessen the appeal of safe-haven investments like government debt.

After the auction announcement, prices "weakened a little bit as players positioned for some supply pressures," said John Canavan, analyst with Stone & McCarthy Research Associates in Princeton, New Jersey.

Some analysts worry the huge doses of new debt — the result of a recession and various government rescue plans — will dilute the market, hurting the perceived quality of U.S. government debt and dampening appetite for it.

Some even worry this could jeopardize the United States’ top-tier credit rating.

Moody’s Investors Service told Reuters TV Thursday that the United States, which posted a record deficit in the last fiscal year, may lose its Aaa-rating if it does not reduce the gap to manageable levels in the next 3-4 years.

In late trade, the benchmark 10-year Treasury note was down 8/32 in price, its yield rising to 3.42% from 3.39% late Wednesday.

Economic data mixed for bonds

Job market data Thursday painted a bit of a mixed picture for bonds, with weekly figures showing new claims for jobless benefits exceeded expectations, while the four-week moving average for new claims fell to the lowest level since mid-January.

"It was a split verdict," said economists at Goldman Sachs. "Initial claims went back up, though not enough to negate modest downward trend. Continuing claims fell further, from an upward revised base."

Two more data points also were mixed, with the Conference Board’s index of leading economic indicators rising for a sixth straight month in September to a two year high, while the Federal Housing Finance Agency said U.S. home prices fell by a seasonally adjusted 0.3% in August.

"The housing recovery will be slow and bumpy," said Paul Dales, U.S. economist at Capital Economics in Toronto.

Thirty-year Treasury bonds were down 17/32. their yields rising to 4.24% from 4.21% late Wednesday, while two-year notes were unchanged in price, yielding 0.95%. 

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