Treasury 7-Year Notes May Yield 2.420% at $29 Billion Auction, Survey Says
The Treasury Department’s $29 billion sale of seven-year notes may draw a yield of 2.420 percent, according to the average forecast in a Bloomberg News survey of eight of the Federal Reserve’s 20 primary dealers.
The securities, which mature in June 2018, yielded 2.410 percent in pre-auction trading. Bids are due by 1 p.m. New York time.
The size of the offering is the same as at the past 11 sales of the seven-year maturity after peaking at $32 billion in auctions from November 2009 through April 2010.
Last month’s seven-year note sale drew a yield of 2.429 percent. The record low yield of 1.890 percent was reached at the September 2010 auction.
The May 26 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 3.24, versus an average of 2.89 for the past 10 auctions.
Indirect bidders, a class of investors that includes foreign central banks, bought 47.6 percent of the notes at the May auction, compared with an average of 50.1 percent for the past 10 sales.
Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 13 percent of the notes at the last offering, compared with the 10-auction average of 8.1 percent.
Seven-year notes have returned 4.7 percent this year, after gaining 8.3 percent in 2010, according to Bank of America Merrill Lynch indexes. The overall Treasury market has returned 2.7 percent in 2011 after rising 5.9 percent last year.
The Fed’s primary dealers trade government securities with the central bank and are obligated to participate in Treasury auctions.
At yesterday’s $35 billion five-year note auction, investors bid for 2.59 times the amount offered, the lowest since June 2010. A record low yield of 0.395 percent at the $35 billion offering of two-year notes on June 27 drew the lowest demand from indirect bidders in more than three years.
To contact the reporter on this story: Joe Ragazzo in New York at jragazzo@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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