Treasuries fall on concerns about added 30-yr supply

Concerns about added supply erased early gains following a private sector report that US employers created fewer jobs than expected in July.

The Treasury said it would issue 30-year bonds on a quarterly basis beginning February, instead of twice a year as it does now, and that total 30-year bond issuance was likely to rise in 2007 to ensure liquidity in the new issue.

“The back end sold off a bit on the Treasury announcement,” said John Spinello, chief fixed-income strategist at Jefferies and Co. “It’s a knee-jerk reaction. We probably will have some additional longer-dated supply in the future so that will create better liquidity situation for the back end of the market.”

The announcement also drew attention to the upcoming supply that will have to be absorbed at the Treasury’s $44 billion quarterly refunding next week.

The Treasury said it would sell $21 billion of three-year notes on Monday, $13 billion of 10-year notes on Aug. 9 and $10 billion of 30-year bonds on Aug. 10.

At 9:28 a.m. EDT (1328 GMT), 30-year bonds US30YTRR_were down 8/32, their yields rising to 5.085 from 5.06 percent before the Treasury announcement and up from 5.07 percent on Tuesday. Bond yields and prices move inversely.

Benchmark 10-year notes US10YTRR were down 1/32 in price for a yield of 4.985 percent, versus 4.97 percent before the announcement and 4.98 percent late on Tuesday.

Two-year notes US2YTRR were unchanged at 4.96 percent.