Treasuries Erase Gains After 10-Year Note Auction

Treasuries erased gains after the U.S. sale of $21 billion in 10-year notes.

The notes drew a yield of 2.648 percent, compared with a forecast of 2.633 percent in a Bloomberg News survey of seven of the Federal Reserve’s 22 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.88, compared with an average of 2.67 for the previous 10 sales. Treasuries earlier rose for the first time in four days.

“The fact that they’re not being offered much in the way of outright yield” led to diminished investor demand, Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut, said before the auction.

The yield on the current 10-year note was little changed at 2.64 percent, at 1:05 p.m. in New York after touching 2.61 percent, according to Bloomberg Bond Trader prices.

Indirect bidders, an investor class that includes foreign central banks, purchased 36.1 percent of the notes, compared with an average of 45.2 percent for the past 10 sales.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 19.4 percent of the notes, compared with an average of 18.9 percent at the last 10 auctions.

Bond Auction

Ten-year notes have returned 4.9 percent this year, compared with a 2.5 percent gain in the broader U.S. Treasuries market, according to Bank of America Merrill Lynch indexes. The benchmark notes lost 7.8 percent in 2013, versus a 3.4 percent decline by Treasuries overall.

The auction is the second of three offerings this week. The U.S. sold $28 billion of three-year debt yesterday at a yield of 0.93 percent and will auction $13 billion of 30-year bonds tomorrow.

The sales will raise $9.7 billion of new cash, as maturing securities held by the public total $59.3 billion, according to the U.S. Treasury.

To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net

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

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