Treasury Prices Edge Lower After $16B Bond Auction

NEW YORK (AP) - Treasury prices edged lower Thursday after the government paid a slightly higher yield in an auction of 30-year bonds.

The new bonds sold at a yield of 4.75 percent, just above the 4.74 percent it was trading at right before the auction. The auction was 2.51 times subscribed, compared to an average of 2.55 times in the previous four auctions. That's a sign of slightly weakening demand for the bonds.

Indirect bidders, a rough proxy for foreign funds and banks, took 43 percent of the notes, compared to the recent average of 36 percent. The $16 billion auction was the last of three this week that raised a total of $72 billion to finance the government's budget deficit.

The price of the 10-year Treasury note fell 37.5 cents per $100 invested. Its yield, which moves in the opposite direction, rose to 3.71 percent from 3.66 percent late Wednesday.

Treasurys have been falling in the last couple of months on improved economic reports. On Thursday, the Labor Department reported 383,000 people applied for unemployment benefits for the first time last week. It was the lowest level in nearly three years and an indication that the job market may be improving.

Treasurys tend to fall, pushing their yields higher, when investors become more confident in the economy and seek out riskier assets like stocks.

The Commerce Department also reported that businesses at the wholesale level increased their inventories in December even though demand for their products slowed. That reflects businesses becoming more confident that demand will pick up.

The 30-year bond was down 87.5 cents and its yield rose to 4.77 percent, up from 4.72 percent late Wednesday. The yield on the two-year Treasury note rose to 0.84 percent from 0.80 percent.

The yield on the three-month T-bill fell to 0.11 percent from 0.13 percent. Its discount was 0.12 percent.