The Treasury Department’s $35 billion sale of five-year notes may draw a yield of 1.723 percent, according to the average forecast in a Bloomberg News survey of seven of the Federal Reserve’s 22 primary dealers.
The securities, which mature in April 2019, yielded 1.730 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s sale of the notes yielded 1.715 percent, the highest since May 2011. The size of today’s offering is the same as the past 43 auctions of five-year notes after peaking at $42 billion from November 2009 through April 2010.
The March 26 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.99, the highest since September 2012 and compared with an average of 2.62 at the past 10 auctions.
Indirect bidders, a class of investors that includes foreign central banks, bought 50.9 percent of the notes at the March sale, compared with the average of 46 percent at the past 10 offerings.
Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 23.1 percent of the notes at the last sale, versus an average of 11.4 percent at the past 10.
Five-year notes have returned 0.8 percent this year, versus a gain of 1.9 percent by the broad Treasuries market, according to Bank of America Merrill Lynch indexes. The five-year securities lost 2.4 percent in 2013, while Treasuries overall fell 3.4 percent.
Today’s offering is second of three auctions of coupon-bearing debt this week. The government sold $32 billion in two-year notes yesterday at a yield of 0.447 percent, the second-highest since May 2011. It will offer $29 billion in seven-year securities tomorrow.
The Fed’s primary dealers trade government securities with the central bank and are obligated to bid in Treasury auctions.