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Tuesday 06th of January 2009
May 4, 2005

Negative reaction to US Treasury bond announcement


by Brian Turner
Negative reaction to US Treasury bond announcement

Prices on long-term U.S. government Treasury bonds fell sharply and yields rose Wednesday when it was announced that the U.S. Treasury would decide in August whether to begin issuing 30-year bonds once again.

The issuance of such bonds was discontinued in 2001, and the effect of the announcement on the market indicates that investors’ first reaction to the idea is a negative one.

It also made it seem that the market was taken by surprise at the news, which sent prices of 30-year Treasury bonds down nearly two points, and yields went up to 4.60 percent, from 4.49 percent on Tuesday.

By mid-afternoon in New York, yields had fallen to 4.618 percent, 13.3 basis points higher. 10-year Treasury bonds were up 4.8 basis points to 4.216 percent.

Some European countries have been issuing 30-year bonds, and France issued a 50-year bond in February. The UK will issue a 50-year bond later in May.

Prices on long-term bonds in Europe and the UK followed the U.S. example Wednesday as prices fell and yields rose. The yield on the 30-year gilt was up 4.5 basis points to 4.476 percent, and the 30-year Bund rose 5.3 basis points to 3.988 percent.

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