BLBG: Two-Year Treasuries Fall Before Record $94 Billion in Auctions
Two-year Treasuries fell for the first time in three days as U.S. stock futures rose and the government prepared to auction $40 billion of the notes, part of a record $94 billion sale this week.
The Treasury Department will follow today’s offering with $32 billion of five-year notes tomorrow and $22 billion of seven-year debt on Feb. 26. Futures on the Standard & Poor’s 500 Index climbed 0.6 percent, the first gain in seven days, as investors moved to riskier assets.
“This is largely about the supply that’s coming,” said Sean Maloney, a London-based fixed-income strategist at Nomura International Plc. “There’s $94 billion going down this week. It’s a lot.”
The yield on the two-year note increased two basis points, or 0.02 percentage point, to 0.96 percent at 6:55 a.m. in New York, according to BGCantor Market Data. The price of the 0.875 percent security maturing in January 2011 fell 1/32, or 31 cents per $1,000 face amount, to 99 27/32.
Investors bid for 2.69 times the amount of debt on offer at the previous sale of two-year notes on Jan. 27. The average for the past 10 offerings is 2.33.
The two-year rate is 0.70 percentage point higher than the high end of the Federal Reserve’s target range of zero to 0.25 percent for overnight bank lending, compared with an average of 0.19 percentage point over the past year, which makes the notes attractive to Daiwa Asset Management Co.
“Demand will rise at the auction,” said Tsutomu Komiya, an investor in Tokyo at Daiwa, a unit of Japan’s second-largest brokerage, which has the equivalent of $108.6 billion in assets. “The U.S. is in a recession with deflation, and the Fed will keep interest rates low.”
U.S. Sentiment
Confidence among U.S. consumers dropped in February to the lowest level on record, according to the median forecast of 69 economists surveyed by Bloomberg News before the Conference Board reports the figure today. S&P/Case-Shiller may say home prices in 20 major metropolitan areas declined the most last year since records began in 2001, a separate survey showed.
The difference between rates on 10-year notes and Treasury Inflation Protected Securities, which reflects the outlook among traders for consumer prices, declined to 1.12 percentage points from 1.37 percentage points on Feb. 9. The figure averaged 1.6747 percentage points for the past year.
