NEW YORK (AP) -- Treasury prices fell Tuesday as traders worried about pressure on the U.S. from international governments at a financial summit starting Thursday of the Group of 20 nations.
The gathering of top leaders in South Korea is not expected to go easy on the U.S. That's because last week's announcement by the U.S. Federal Reserve to buy $600 billion of bonds has drawn complaints from major exporting nations including China and Germany.
The Fed's plan, which is aimed at stimulating the U.S. economy, also has the potential of further driving down the dollar's value against other currencies. Other nations argue that the weaker dollar would give U.S. goods an unfair advantage in global markets by making them cheaper compared with those priced in euro, yen or other major currencies.
The pressure on the dollar has also caused unease in the bond market because it reduces the value of assets priced in dollars, which could quash foreign appetite for U.S. Treasurys. China, Japan and South Korea are major buyers of Treasurys.
"There are questions over what the world will tolerate from a trade perspective," said John Spinello, bond strategist at Jefferies & Co. "A bigger concern is whether the foreigners cease to buy, driven by the lower dollar."
Earlier Tuesday, the government sold $24 billion of new 10-year bonds at a yield of 2.63 percent. Despite the strong results from the auction, Treasury prices were broadly lower.
The yield on the 10-year Treasury note rose to 2.66 percent from 2.56 percent late Monday. Its price fell 93.8 cents to $99.66. Bond yields rise when their prices fall.
Another factor that has weighed on the bond market was the Federal Reserve's decision to target its buying on shorter-dated bonds maturing between two and ten years. Since the announcement last week, the longer-dated 30-year bond has fallen sharply.
The yield on the 30-year Treasury bond rose to 4.24 percent, its highest level since June 10 and well above the 4 percent level it was trading at last Tuesday, just before the Fed announced its bond-buying program. Its price fell $2.06 to $93.69.
The government is also scheduled to sell $16 billion of new 30-year bonds on Wednesday. Without the Fed as a major buyer, people are wondering how much demand there will be for the new bonds. It's a lot of supply in a market that won't have a large Fed purchase, said John Briggs, market strategist at RBS Securities.
Adding to all the stress in the market was news that a credit agency in China, Dagong Global Credit Rating Co., lowered its rating for the U.S. to A+ from AA. Under normal circumstances the market would tend to ignore ratings from an agency that is not as well-known in international circles such as major players like Moody's or Standard & Poor's. However the timing of the downgrade right before the G20 meeting is viewed as another indication of China's displeasure over the Fed's action.
"You can look at it as a signal from China that it is concerned about U.S. policy," said Spinello from Jefferies. Spinello noted that the agency had not granted its top AAA rating to United States debt in the past.
The yield on the two-year Treasury note rose to 0.45 percent from 0.41 percent late Monday, and the yield on the five-year note rose to 1.25 percent from 1.12 percent.
The yield on the three-month Treasury bill was unchanged at 0.12 percent. Its discount was 0.13 percent.
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