Treasury 10-Year Notes May Yield 2.195% at Auction, Survey Says

The Treasury’s $21 billion sale of 10-year (USGG10YR) notes may draw a yield of 2.195 percent, the highest since October 2011, 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 May 2023, yielded 2.195 percent in pre-auction trading. Bids are due by 1 p.m. New York time. The record-low sale yield, 1.459 percent, was reached at the July 11 offering.

The May 8 auction’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.70, versus an average of 2.83 at the past 10 sales.

Indirect bidders, a class of investors that includes foreign central banks, bought 33.9 percent of the notes at last month’s offering, compared with an average of 35.8 percent at the past 10 auctions.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 16.9 percent of the offering in May and an average of 21.2 percent at the past 10 auctions.

Ten-year U.S. debt has lost 2.5 percent this year, compared with a 1.4 percent drop in the broader Treasury market, according to Bank of America Merrill Lynch indexes. The benchmark notes returned 4.2 percent in 2012, compared with a 2.2 percent gain by Treasuries overall.

The auction is the second of three offerings this week as the government sells $66 billion of notes and bonds. It auctioned $32 billion of three-year securities yesterday at a yield of 0.581 percent and is due to sell $13 billion of 30-year debt tomorrow.

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

To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net

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

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