Treasuries Fall After 2-Year Note Auction Starts Sales

Treasuries fell after the U.S. sold $35 billion in two-year securities in the first of three note auctions this week totaling $99 billion.

The notes drew a yield of 0.270 percent, compared with a forecast of 0.278 percent in a Bloomberg News survey of nine 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 3.76, highest since September, compared with an average of 3.56 for the past 10 sales. The Fed started a two-day meeting, with Chairman Ben S. Bernanke scheduled to hold a press conference tomorrow.

“Two-year auctions have come and gone with no problems as the Fed is still on hold and there remains a risk-averse bid in the market,” said Justin Lederer, an interest-rate strategist in New York at Cantor Fitzgerald LP, one of 21 primary dealers required bid at the auctions. “Unless something changes at the Fed or in the global economy, then expect to continue seeing well-bid two-year note auctions.”

The yield on the current two-year note rose one basis point, or 0.01 percentage point, to 0.27 percent, at 1:11 p.m. in New York, according to Bloomberg Bond Trader prices. The yield on the benchmark 10-year note rose two basis points to 1.96 percent.

Indirect bidders, an investor class that includes foreign central banks, purchased 32.1 percent of the notes, compared with an average of 32.4 percent for the past 10 sales.

Two More Auctions

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 7.8 percent of the notes at the sale, the lowest since February 2011, compared with an average of 13.5 percent for the past 10 auctions.

The two-year notes being sold today yielded 0.275 percent in pre-auction trading. The Treasury is due to auction $35 billion of five-year securities tomorrow and $29 billion of seven-year debt on April 26.

Two-year notes have gained 0.1 percent this year, compared with a 0.2 percent gain for Treasuries overall, according to Bank of America Merrill Lynch indexes.

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