Treasuries Little Changed After $32 Billion 3-Year Note Auction

Treasuries were little changed after the U.S. sale of $32 billion of three-year notes.

The securities, which mature in July 2015, drew a yield of 0.366 percent, compared with the average forecast of 0.367 in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.52, compared with an average of 3.45 for the past 10 sales.

“From a value perspective, I don’t see any reason to buy the front end of the curve,” Larry Dyer, a U.S. interest-rate strategist in New York with HSBC Holdings Plc, a primary dealer obligated to bid in U.S. debt auctions, said in a telephone interview before the auction. “It’s just not giving much of a premium over ultra-safe, short-term assets.”

The yield on the current three-year note rose one basis points, or 0.01 percentage point, to 0.36 percent, at 1:06 p.m. in New York, according to Bloomberg Bond Trader prices. The yield on the benchmark 10-year note was little changed at 1.52 percent.

Indirect bidders, an investor class that includes foreign central banks, purchased 30 percent of the notes, compared with an average of 35.5 percent for the past 10 sales.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 10.2 percent of the notes at the sale, compared with an average of 9.9 percent for the past 10 auctions.

Week’s Auctions

The Treasury is selling $66 billion in notes and bonds this week. The government will sell $21 billion in 10-year debt tomorrow and $13 billion in 30-year securities on July 12.

Three-year notes have returned 0.3 percent this year, compared with a 2.5 percent gain for Treasuries overall, according to Bank of America Merrill Lynch indexes. The three- year securities returned 3.4 percent in 2011, while Treasuries overall gained 9.8 percent.

Ten-year note yields pared gains today after Bank of England Governor Mervyn King said the U.K. economy doesn’t show “great signs” of recovering from recession. Yields rose earlier as European officials took actions to speed up loans for Spanish banks.

Spanish bond yields fell below 7 percent after euro-region finance chiefs meeting in Brussels agreed to make available 30 billion euros ($37 billion) by the end of this month to shore up Spain’s banks. The aim is to eventually use the region’s bailout money to recapitalize banks directly instead of weighing the government with the debts.

European governments will provide as much as 100 billion euros in emergency loans to Spain’s banks and may move the costs off the balance sheet of the government in Madrid to shield the euro region’s fourth-largest economy.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

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

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