U.S. Treasury Sets Record for Debt Sales at $2.116 Trillion

The U.S. Treasury set a record for borrowing in a calendar year after selling $32 billion of three- year securities to push its total note and bond sales to $2.116 trillion amid all-time high demand for the debt.

Bond dealers and investors have bid $6.33 trillion at the auctions this year, or a record $2.99 for every dollar of debt sold. Treasuries tumbled today, pushing the 10-year note yield up the most since September 2008, after President Barack Obama agreed to extend tax cuts for two years and the three-year note sale drew the lowest demand since February.

“The fact that Treasury is able to issue all this paper and get it financed speaks to the fact that deleveraging in the private sector has been on-going and significant,” Chris Ahrens, head interest-rate strategist at UBS AG in Greenwich, Connecticut, one of 18 primary dealers that trade directly with the Federal Reserve. “The household sector, the business sector, the financial sector continues to deleverage, paving the way for Treasury to pick up the slack.”

The benchmark 10-year note yield climbed 21 basis points, or 0.21 percentage point, to 3.13 percent at 5 p.m. in New York, according to BGCantor Market Data. The price of the 2.625 percent security maturing in November 2020 dropped 1 24/32, or $17 per $1,000 face amount, to 95 22/32.

The yield touched 3.17 percent today, the highest level since June 23, according to Bloomberg data. Two-year note yields gained 10 basis points to 0.52 percent.

The Treasury sold $2.109 trillion in notes and bonds in 2009, more than double the $922 billion it sold in 2008 as the financial crisis took root and led to $1.82 trillion of credit- related losses since the start of 2007.

Treasury debt outstanding has nearly doubled since the start of the crisis to $8.75 trillion as of November from $4.40 trillion from the start of the crisis in July 2007.

To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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