The Treasury Department’s $35 billion sale of five-year notes may draw a yield of 1.618 percent, according to the average forecast in a Bloomberg News survey of eight of the Federal Reserve’s 21 primary dealers.
The securities, which mature in August 2018, yielded 1.62 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s sale of the securities yielded 1.41 percent, compared with 1.48 percent the month before, the highest since July 2011. The size of today’s offering is the same as the past 35 sales of five-year notes after peaking at $42 billion from November 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 2.46. The average for the past 10 auctions was 2.74.
Indirect bidders, a class of investor that includes foreign central banks, bought 53.9 percent of the notes at the July sale, the most since November 2009. The average for the past 10 auctions is 44.2 percent.
Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 8.3 percent of the notes at the last sale, compared with an average of 15.9 percent at the past 10.
Five-year notes have lost 2.6 percent this year, versus a loss of 3.1 percent for Treasuries overall, according to Bank of America Merrill Lynch indexes. The five-year securities returned 2.3 percent in 2012, while Treasuries overall rose 2.2 percent.
Today’s offering is the second of three note auctions this week totaling $98 billion. The government sold $34 billion in two-year debt yesterday at a yield of 0.386 percent, and will sell $29 billion in seven-year securities tomorrow.
The sales will raise $38.1 billion of new cash, as maturing securities held by the public total $59.9 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.