Fed Purchases Give Treasuries a Respite From Debt Sales, FTN's Vogel Says

A decline in the amount of Treasuries offered for sale to the Federal Reserve compared with the amount bought by the central bank should help support prices for U.S. government debt, according to FTN Financial.

The central bank bought $7.79 billion of Treasuries today after holders offered to sell $17 billion of the securities under its debt purchase program restated in November, according to Fed data. The acceptance of 46 percent of offers compares with an average ratio of 34 percent at the last 10 purchases, and was the highest since Dec. 15, when the bank bought $6.78 billion, or 52 percent of the $13.114 billion put up for sale.

A higher ratio of Fed purchases is supportive for Treasuries because it indicates less desire by Treasury holders to sell the debt under the so-called quantitative easing program, Jim Vogel, head of agency-debt research at FTN in Memphis, Tennessee, said in a telephone interview.

“The initial wave of QE2 was met with very large amounts tendered for purchase. The acceptance rates were so low, people said, ‘Oh my God, people want to sell every Treasury they own,’” Vogel said. The support, “when the market has been active, each day has been tested by a significant amount of selling,” with the decline in offers to sell suggesting a respite for the market, he said.

U.S. 10-year note yields increased five basis points, or 0.05 percentage point, to 3.34 percent at 2:15 p.m. in New York, according to BGCantor Market Data. Earlier they rose as much as 12 basis points to 3.42 percent. The price of the 2.625 percent security due in November 2020 fell 13/32, or $4.06 per $1,000 face amount to 94.

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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