Treasuries tumble as sell-off continues amid large corporate deals; 30-year yield up 8 bps

By Sheri Kasprzak

New York, May 6 – Treasuries continued to struggle Wednesday as bonds sold off in the wake of a couple of massive corporate issues, market insiders said.

The 30-year bond yield rose by 8 basis points to 2.98%, and the 10-year note yield rose by 6 bps to 2.25%. The five-year yield rose 4 bps to 1.58%.

Corporates dominated market action as a unit of Royal Dutch Shell plc offered $10 billion and Apple Inc. sold $8 billion of debt.

Trade balance widens

Looking to data, the U.S. trade balance widened to minus $51.4 billion in March from minus $35.9 billion in February, marking a post-recession weak point.

“Of course, when there’s a swing as extreme as that one, alarm bells go off,” said Guy LeBas, chief fixed income strategist with Janney Montgomery Scott LLC.

“Considering the strength in the dollar and the rebound in energy prices during March, some widening in the trade deficit was inevitable, but the bulk of the extreme move has more to do with the rapid unwind of the West Coast port worker slowdowns and strikes. As workers returned mid-March, the backlog of imports coming off ships sailed through the ports, pun very much intended, forcing a $17.6 billion, or 10.8%, spike in non-petroleum goods imports.”

March’s trade balance data has led to many revisions to first-quarter gross domestic product forecasts. LeBas said those revisions might be hasty.

“There’s just one problem,” he noted Wednesday.

“It’s not as if those massive imports were instantly sold to end users; instead a huge percentage will likely end up as a spike in wholesale and retail inventories, which would create an offset to the negative GDP impact from a wider deficit. As a result, we’re leaving our GDP estimate for the first quarter unchanged at +0.2%, right where the first estimate came out last week.”

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