Treasuries Remain Higher After Record Two-Year Note Auction

feelucky

Treasuries Remain Higher After Record Two-Year Note Auction
Share | Email | Print | A A A

By Susanne Walker and Cordell Eddings

July 28 (Bloomberg) -- Treasuries remained higher as the government sold a record $42 billion of two-year notes and a report showed confidence among U.S. consumers fell more than forecast this month.

The notes drew a yield of 1.08 percent, more than the forecast of 1.058 percent in a Bloomberg News survey of eight of the Federal Reserve’s primary dealers that bid on the securities. The bid-to-cover ratio, which gauges demand by comparing total bids with amount of securities offered was 2.75, compared with an average of 2.58 at the last 10 auctions.

Ten-year note yields retreated from near the highest levels in five weeks earlier after the Conference Board’s index dropped to 46.6, a second consecutive decline. Stocks declined, increasing the refuge appeal of government debt.

“Everyone keeps waiting for a magic story from the data to show us the bottom of this mess but the data is just getting less worse,” said Thomas Tucci, head of U.S. government bond trading at RBC Capital Markets in New York, one of the 18 primary dealers required to bid at Treasury auctions. “The economy is still not back on a strong footing.”

The yield on the 10-year note fell seven basis points, or 0.07 percentage point, to 3.65 percent at 1:07 p.m. in New York, according to BGCantor Market Data. The rate touched 3.76 percent yesterday, the highest level since June 22.

The two-year note was little changed at 1.04 percent, after dropping as low as 1 percent.

Record Sale

The two-year sale is the biggest offering of the notes since the Treasury began monthly auctions of them in the mid- 1970s. The department sold $40 billion of the maturity at each of the past six auctions. At the last sale on June 23, the two- year notes drew a yield of 1.151 percent. The bid-to-cover ratio was 3.19 last month, the highest since September 2007.

Indirect bidders, a class of investors that includes foreign central banks, bought 33 percent of the notes, compared with 68.7 percent at the June auction, the most in at least six years. The average at the past 10 sales is 40.3 percent.

The two-year note sale will be followed by a $39 billion auction of five-year debt tomorrow and a $28 billion offering of seven-year securities on July 30.

The U.S. had raised $1.046 trillion from debt sales this year to help finance a recovery from the recession, government data show. The budget deficit is projected to reach $1.85 trillion in 2009, equivalent to 13 percent of the nation’s economy, according to the nonpartisan Congressional Budget Office.

International Demand

Demand for debt was boosted earlier after Treasury Secretary Timothy Geithner assured his Chinese counterparts the U.S. will rein in a record budget deficit, seeking to ease China’s concern about the value of its Treasury holdings.

The U.S. will ensure a “sustainable” deficit by 2013, Geithner said yesterday on the first day of a two-day meeting between U.S. and Chinese officials in Washington. China, the largest foreign holder of U.S. debt with $801.5 billion of the securities, bought $38 billion more Treasuries than it sold in May, according to Treasury data.

The Standard & Poor’s 500 Index fell 0.7 percent, retreating from an eight-month high, after a two-week really left the index trading at its most expensive valuation since September.

“The stock market selling off, combined with the fact that bonds have been getting hit for a number of sessions, argues for bonds bounding back,” said Jay Mueller, who manages about $3 billion of bonds at Wells Fargo Capital Management in Milwaukee.

The difference between 2- and 10-year notes, known as the yield curve, widened to 2.71 percentage points yesterday, the most since June 5. Two-year notes have handed investors a return of 0.4 percent this year, compared with a 9.9 percent loss for holders of 10-year notes, Merrill Lynch & Co. indexes showed.

Libor-OIS

The financial crisis, which started with the collapse of the U.S. property market in 2007, has triggered $1.52 trillion of writedowns and credit losses at banks and other institutions and sent the global economy into its first recession since World War II. The government and the Federal Reserve have spent, lent or committed more than $12 trillion in a bid to revive the economy and credit markets.

Yields suggest the Fed’s efforts may be working. The Libor- OIS spread, a gauge of banks’ reluctance to extend credit, dropped below 30 basis points for the first time since January 2008. The London interbank offered rate, or Libor, that banks say they charge each other to borrow in dollars for three months fell one basis point to 0.49 percent, staying below 0.50 percent for a second day, the British Bankers’ Association said.

feelucky

NEW YORK, July 28 (Reuters) - The U.S. Treasury sold $42 billion in two-year debt on Tuesday in a sale that drew lackluster demand by some measures and might not bode well for other bond auctions later in the week.

Demand overall was above average, measured by the bid-to-cover ratio of 2.75. However, a key proxy for foreign interest, the indirect bidder category, was below average at 32.6 percent.

Yields at auction were also slightly higher than expectations, gauged by trading in the when-issued market just before the sale. The two-year sale is part of this week's record $115 billion in coupon securities being auctioned.

With the government set to issue $2 trillion in new bonds this year to finance economic and financial rescues, investors have been watching for any signs of waning demand for U.S. debt, particularly among foreigners.

Treasury auctions have come under particularly close scrutiny since investors began to question the longevity of the
United States' prized AAA credit rating back in May.

((Reporting by Burton Frierson; editing by Gary Crosse)) Keywords: USA BONDS/AUCTION

jsl

从日内高点都 屁啊急（啪唧） 1+% 了

ksd9235

who are the buyers?