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The weight of supply snapped the Treasury market's five-day winning streak Wednesday. Hedging the explosion of corporate and agency issuance erased opening gains and provided a good excuse to take profits through the session. However, a number of other factors contributed to the declines, including technically overbought conditions, a rebound in stocks, and unwinding of some of the safety trade.
Losses were fairly equally distributed across the curve as supply hit throughout the maturity spectrum. An upsized $5 billion offering from Hong Kong based Hutchison Whampoa, including 7-year, 10-year, and 30-year paper was the impetus behind the early selling. Technicians also got involved when the 30-year note failed to sustain penetration of 5%, and the bond yield corrected higher to 5.09% at the close.
Meanwhile, unwinding of some of the recent safety bid tied to geopolitical concerns and more reports of financial frauds and scandals weighed on the short end. And although Fed officials have yet to suggest any change in policy, their increasingly optimistic outlook on the economy are keeping buyers at bay. A rebound in stocks provided the final blow to bonds, as the Nasdaq rallied nearly 1% on the day.