BLBG:Treasury Snap Three-Day Advance Before Debt Sale
Treasury 10-year notes snapped a three-day advance before the U.S. auctions $21 billion of the securities today, the second of three debt sales this week.
The Federal Reserve plans to buy as much as $1.75 billion of Treasuries due from February 2036 to November 2042 today, according to the Fed Bank of New York website. The central bank is purchasing $85 billion of government and mortgage debt a month to spur the economy by putting downward pressure on interest rates. Fed Bank of Richmond President Jeffrey Lacker said yesterday the Fed’s record easing measures risk fueling inflation after this year.
“Treasuries are giving back a bit of ground ahead of the 10-year re-opening today,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “The last couple of 10-year re- openings have gone well and I expect this one to go fine too. I’m not bearish here with the reality being the Fed are still going to be absorbing 60 percent of Treasury supply this year. I would look for the market to stabilize.”
The benchmark 10-year yield was little changed at 1.87 percent at 10:47 a.m. London time, based on Bloomberg Bond Trader prices. The price of the 1.625 percent note maturing in November 2022 was at 97 26/32.
Treasuries have handed investors a 0.6 percent loss this year through yesterday, according to Bank of America Merrill Lynch indexes. They returned 2.2 percent in 2012, the smallest annual return since 2009.
Previous Sale
At the previous auction of 10-year securities on Dec. 12, investors bid for 2.95 times the amount of debt offered, compared with 2.59 times in November.
Direct bidders purchased 42.7 percent, the most since 45.4 percent in July, which was a record. Indirect bidders, the investor class that includes foreign central banks, bought 24.2 percent of the notes, the least since April 2009.
A $32 billion auction of three-year notes yesterday drew a yield of 0.385 percent, compared with a forecast of 0.387 percent in a Bloomberg News survey of five of the Federal Reserve’s 21 primary dealers.
The Treasury is scheduled to conclude this week’s auctions with a $13 billion sale of 30-year bonds tomorrow.
“I intend to remain alert for signs that our monetary policy stance needs adjustment,” Lacker said in a speech in Columbia, South Carolina. He does not vote on monetary policy this year or next.
The difference between yields on 10-year notes and same- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 2.50 percentage points, compared with an average over the past decade of 2.19 percentage points.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
