Surprise Increase in Rates Is Credited to Signs of Recovery

Fed to start buying T-bonds today, hoping to move rates

Heads up – the U.S. Treasury is auctioning off $13 billion in 30-year bonds this afternoon, and it could get interesting. This week, other government auctions for shorter-dated Treasuries finished with a very small "tail."

LONDON (Reuters) - Debt may be everywhere but there's a scarcity of bonds. With governments awash with debt and furiously selling new securities to fund bloated budget deficits, the idea of a bond shortage on the marketplace may sound puzzling.

Spain sold 3.46 billion euros of 10- and 30-year bonds on Thursday at lower interest rates, reflecting easing market fears over the country's ability to manage its public debt.The treasury auctioned 2.46 billion euros ($3.34 billion) of 10-year bonds at an average yield, or rate of return for investors, of 5.20 percent, compared with 5.446 percent at a sale on December 16.It sold 997 million euros of 30-year bonds at an average yield of 5.957 percent. Bonds of similar length were trading at the market at 5.99 percent.

Repsol SA, Spain’s largest energy company, expects to sell liquefied natural gas assets for about 2-billion euros (US$2.7-billion) by early February, according to a person familiar with the matter.

By Difu Wu:Many investors have been lured into bonds lately, impressed by their strong performance over the past 30 years, as bond prices rose with the dramatic fall of interest rates from double digits to multi-decade lows today (see Chart 1). In 2011, the Barclays U.S. Aggregate Bond Index returned 7.84 percent, 30-year Treasury bonds returned 35 percent, while the S&P 500 was basically flat for the year. Chart 1. 30 Years US Treasury Bond Yield.