Treasury Two-Year Notes May Yield 0.266% at Sale, Survey Shows

The Treasury Department’s $35 billion sale of two-year notes may draw a yield of 0.266 percent, according to the average forecast in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers.

The securities, which mature in August 2014, yielded 0.275 percent in pre-auction trading. Bids are due by 1 p.m. New York time. The record auction low was 0.220 percent on July 24 at the last sale of the maturity.

The size of the offering is the same as at the past 22 sales of two-year notes after peaking at $44 billion from October 2009 through April 2010.

The July 24 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 4, the most since the record high of 4.07 in November. The average ratio for the past 10 auctions is 3.75.

Indirect bidders, a class of investors that includes foreign central banks, bought 30.9 percent of the notes at the July sale after purchasing 31.7 percent at the June offering. The average for the past 10 auctions is 33.4 percent.

Direct bidders, non-primary dealer investors that place their bids directly with the Treasury, purchased 9.9 percent of the notes at the last sale, compared with an average of 10.8 percent at the past 10.

Two-year notes have returned 0.1 percent this year, compared with a 2.1 percent gain by Treasuries overall, according to Bank of America Merrill Lynch indexes. The two-year securities returned 1.5 percent in 2011, while Treasuries overall rose 9.8 percent.

Three Auctions

Today’s offering is the first of three note auctions this week totaling $99 billion. The government will sell $35 billion in five-year debt tomorrow and $29 billion in seven-year securities on Aug. 30.

The sales and a $14 billion auction of five-year Treasury Inflation Protected Securities on Aug. 23 will raise $62.6 billion of new cash, as maturing securities held by the public total $50.4 billion, according to the U.S. Treasury.

The Fed’s primary dealers trade government securities with the central bank and are obligated to bid in Treasury auctions.

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net

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

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