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发表于 2009-5-27 02:20 PM
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Treasuries Fall on Concern Record Sales Will Overwhelm Demand
May 27 (Bloomberg) -- Treasuries fell for a fourth day, pushing 10-year note yields to a six-month high, amid concern record U.S. debt sales will overwhelm investor demand as the economy begins to show signs of stability.
Government debt declined even as today’s auction of a record-tying $35 billion in five-year notes drew the most demand in three months from a group of investors that includes foreign central banks. The Treasury will sell $26 billion in seven-year notes tomorrow, the third auction this week.
“The reality is that we have one more auction left and a lot of supply,” said Kevin Giddis, head of fixed-income sales, trading and research at the brokerage Morgan Keegan Inc. in Memphis, Tennessee. “This is the beginning of a lot of sales. We are in a bit of a freefall.”
The decline in prices pushed 10-year note yields to 2.71 percentage points more than two-year securities, approaching the record of 2.74 percentage points set in August 2003.
The yield on the 10-year note rose 14 basis points, or 0.14 percentage point, to 3.70 percent at 2:25 p.m. in New York, according to data compiled by BGCantor Market Data. That’s the highest since Nov. 17. The price of the 3.125 percent security due in May 2019 fell 1 4/32, or $11.25 per $1,000 face amount, to 95 8/32.
The yield on the existing five-year note maturing in April 2014 rose 10 basis points to 2.40 percent. The 30-year bond yield climbed seven basis points to 4.57 percent.
The U.S. has raised $720.057 billion in new cash this year selling Treasury securities, while the Federal Reserve has purchased $130.5 billion in U.S. debt. The net new cash raised in 2009 by the U.S. is $595.523 billion.
Indirect Bids
The five-year notes auctioned today were sold at a yield of 2.31 percent, compared with an average forecast of 2.335 percent by eight bond-trading firms surveyed by Bloomberg News before the 1 p.m. bidding deadline.
Indirect bidders, the class of investors that includes foreign central banks, bought 44.2 percent of the five-year notes, compared with an average of 32.4 percent in the last 10 auctions.
Today’s so-called bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.32, compared with a 2.17 average at the past 10 sales of the securities. The Treasury sold $40 billion in two-year notes yesterday and will sell $26 billion in seven-year notes tomorrow.
“The key thing is what happens to the seven-year tomorrow and that I don’t know the answer to,” said Andrew Brenner, co- head of structured products and emerging markets in New York at MF Global Inc., the world’s largest broker of exchange-traded futures.
Credit Rating
Ten-year Treasury fell the most last week since June 2008 as investors speculated a record supply of Treasuries to pay for a mounting budget deficit may jeopardize the U.S.’s AAA credit rating.
The U.S. government’s Aaa credit rating is stable “even with a significant deterioration” in the nation’s debt position, Moody’s Investors Service said today.
Speculation that the U.S.’s top-credit rating may be under threat has risen since Standard & Poor’s cut Britain’s outlook to “negative” from “stable” last week, citing the nation’s soaring debt burden. The U.S.’s $11.2 trillion of debt is about 79 percent of the $14.1 trillion in gross domestic product, according to Bloomberg data. In the U.K., the debt to GDP ratio approaches 100 percent.
The U.S.’s credit rating is supported by “a diverse and resilient economy, strong government institutions, high per capita income, and a central position in the global economy,” New York-based Moody’s said in a statement.
‘Lurking Concern’
“There remains the lurking concern that foreign demand is focusing on the short end, leaving the back end of the curve vulnerable,” Alan Ruskin, a global strategist at RBS Securities Inc. in Greenwich, Connecticut, wrote in a note today. RBS is one of the 16 primary dealers that are obligated to participate in Treasury auctions.
Increased debt sales and expectations that Fed officials will leave interest rates low as the economy begins to grow have led to an increase in inflation expectations. Ten-year breakeven rates, the difference between yields on 10-year inflation- indexed bonds and nominal Treasuries of the same maturity, touched 1.9218 percent today, the widest the spread has been since Sept. 23.
International investors are growing concerned that the pace of government borrowing will erode the value of their Treasury holdings. Chinese Premier Wen Jiabao stressed in March that China was “worried” about its investment in U.S. Treasuries and looked for government assurances.
Two-Year Auction
The nation, which is the largest U.S. creditor with $767.9 billion of debt, has shifted its purchases in recent months to shorter-maturity bills and notes from longer-maturity securities.
Treasury Secretary Timothy Geithner said today he sees indications that the U.S. economy is in the early stages of rebounding from a recession.
“The national economy is showing some initial signs of stability, confidence is improved, the financial system is starting to heal, credit is starting to ease a bit,” he said in Roxbury, Massachusetts. “It’s just the beginning, however. We have a lot more work to do to lay the foundation for a sustainable recovery with the gains broadly shared among all Americans.”
Fed Purchases
The sale of two-year notes yesterday helped ease concerns that foreign investors will abandon U.S. assets.
A move to higher yields is poised to pause, based on a gauge of momentum that traders use to predict price changes. The 14-day relative-strength index for 10-year yields rose to 72 from 57 a week ago, according to data compiled by Bloomberg. Readings above 70 indicate yields will probably fall and prices, which move in the opposite direction, will rise.
The last time the figure climbed above 70 was on May 7. Ten-year yields fell 17 basis points in the next two days, the biggest rally since March 18 when the Fed announced a plan to buy government debt.
The Fed bought $6 billion of Treasuries maturing between May 2012 and August 2013 as part of the central bank’s effort to buy $300 billion of the securities over the next six months. |
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