U.S. Treasury bond yields extended their pullback following a key auction of short-term debt Tuesday, but demand for the new paper weakened, particularly from foreign investors, suggesting billionaire investor Bill Ackman's call for an end to the selloff could face near-term challenges.
Foreign buyers, typically central banks, took up 62% of the $51 billion sale, down from the 65% figure reported in September and below the near-term average of around 65.5%. The auction comes less than a day after Ackman, who runs Pershing Square Capital Management, claimed to have covered his short position in the Treasury bond market following the first move past 5% for 10-year notes since 2007.
The Atlanta Fed's GDPNow forecasting tool, meanwhile, suggests a current quarter growth rate of 5.4%. "The prices for oil and gold received bids, while equity prices understandably pulled back in the wake of the attack, yet U.S. Treasuries and the dollar have not received the usual “safe haven” buying strength, likely due to the concerns of global investors over expanding supply following the recent credit downgrade," said John Lynch, CIO for Comerica Wealth Management in Charlotte.
The Fed is also selling around $75 billion a month in Treasury, agency and mortgage-backed bonds back into the market as part of its 'quantitative tightening' program.