U.S. Three-Year Notes May Yield 0.346% at Sale, Dealer Survey Says

The Treasury Department’s $32 billion sale of three-year notes may draw a yield of 0.346 percent, according to the average forecast in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers.

The amount being offered is unchanged from the previous 16 sales of the maturity. The notes, which mature in February 2015, yielded 0.333 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s auction of three-year notes drew a yield of 0.370 percent and the record low of 0.334 percent was set Sept. 12.

The Jan. 10 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 3.73, the highest since at least 1993, when the government began releasing the data. It compared with an average of 3.35 for the past 10 sales.

Indirect bidders, a class of investors that includes foreign central banks, bought 38.5 percent of the notes at the January offering, compared with 39.1 percent of the notes at the December sale. The average for the past 10 offerings is 37.4 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 5.3 percent of the notes at the last sale, versus 7 percent at the December offering, and an average of 11.2 percent for the past 10 auctions.

Three-year notes returned 3.4 percent last year, compared with a gain of 9.8 percent for Treasuries overall, according to Bank of America Merrill Lynch indexes.

The Treasury is selling $72 billion in notes and bonds this week. It’s due to auction $24 billion of 10-year securities tomorrow and $16 billion of 30-year debt on Feb. 9. This week’s auctions will raise $22.4 billion of new cash as maturing securities held by the public total $49.6 billion.

The amount of marketable securities outstanding rose to $10.07 trillion as of Jan. 31, up from $9.94 trillion at the end of last year.

Primary dealers trade government securities with the central bank and are obliged to participate in Treasury sales.

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 dliedkta@bloomberg.net

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