The Treasury’s $21 billion sale of 10-year notes may draw a yield of 1.764 percent, according to the average forecast in a Bloomberg News survey of eight of the Federal Reserve’s 21 primary dealers.
The notes, which mature in August 2022, yielded 1.760 percent in pre-auction trading. Bids are due by 1 p.m. New York time. The July 11 offering of 10-year notes drew a record-low sale yield of 1.459 percent.
The August auction’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.49, the lowest level since August 2009. The average ratio at the past 10 sales was 3.09.
Indirect bidders, a class of investors that includes foreign central banks, bought 40.6 percent of the notes at the previous offering, compared with an average of 42 percent for the past 10 auctions.
Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 5.2 percent of the offering in August, the fewest since February 2011. That followed a record high 45.4 percent of the notes at the July sale, and compared with an average of 17 percent for the past 10 auctions.
Ten-year U.S. debt has gained 3.7 percent this year, according to Bank of America Merrill Lynch indexes, outperforming the 2 percent gain in the broader Treasury market. The notes returned 17 percent in 2011, almost double the 9.8 percent gain by Treasuries overall.
The government is selling $66 billion of notes and bonds this week. It’s due to auction $13 billion of 30-year debt tomorrow after a $32 billion three-year note sale yesterday that had a bid-to-cover ratio of 3.94, the highest on record for the maturity.
The sales will raise $27.9 billion of new cash as maturing securities held by the public total $38.1 billion, according to the Treasury.
Primary dealers trade government securities with the central bank and are obliged to participate in Treasury sales.
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