* Higher yields push demand in auction of seven-year notes
* Ten-year Treasury yield falls to two-week low
* Thirty-year yield hits three-week low
(Recasts with results of auction; updates to U.S. market
afternoon trading; adds quotes)
By Dion Rabouin
NEW YORK, Dec 29 U.S. Treasury yields fell
across the curve and most hit two-week lows on Thursday as
investors bought safe-haven government debt after a strong
seven-year note auction on the last full trading day of the
The high yield on the seven-year note sale was more than 2
basis points below the 1 p.m. when-issued level, according to
Analysts said the strong bid for seven-year paper, which
followed a strong five-year note auction on Wednesday, was
largely the result of an overzealous selloff that has gripped
bond markets since the election of Donald Trump as U.S.
president, boosting yields for newly issued Treasuries.
"The auctions were so well bid because the yield is so much
higher," said Jennifer Vail, head of fixed-income research for
US Bank Wealth Management in Portland, Oregon. "At the end of
the day that's going to drive more dollars into any new
In addition to the impact of Trump's election victory, which
has sent yields on U.S. 10-year Treasury notes from 1.83 percent
on Nov. 8 to 2.51 percent at their open Thursday, Vail said
year-end buying by investors to rebalance their portfolios has
increased appetite for government debt.
The 10-year note was last up 8/32 in price to
yield 2.48 percent. Yields earlier fell to 2.46 percent, their
lowest level since Dec. 14.
Yields on 30-year Treasury bonds fell to a three-week trough
of 3.06 percent after the auction. The long bond retraced that
move later and was up 2/32 in price to yield 3.08 percent.
"I sense that people realize that longer-term bonds already
took it on the chin and we may have gotten ahead of ourselves,"
said Karyn Cavanaugh, senior market strategist at Voya
Investment Management in New York.
"Things are looking better for 2017 - we have the potential
for a lot of pro-growth policies - but there are some risks and
the best way to mitigate risk is with long-term Treasuries."
Investors will look to a full slate of U.S. inflation,
manufacturing and employment data in the coming week,
culminating in the Jan. 6 release of the monthly U.S. non-farm
The bond market will close at 2 p.m. Friday in advance of
the New Year's holiday weekend.
(Reporting by Dion Rabouin in New York; Editing by Dan Grebler
and Leslie Adler)