Treasuries Little Changed After U.S. Sells $29 Billion in Debt

Treasuries were little changed after the U.S. auctioned $29 billion in seven-year notes to weaker-than average demand.

The securities drew a yield of 1.248 percent, compared with an average forecast of 1.243 percent in a Bloomberg News survey of six of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with amount of securities offered, was 2.56, versus an average of 2.68 at the past 10 sales. Treasuries are heading for a third week of gains amid concern Cyprus’s banking turmoil will worsen Europe’s sovereign-debt crisis.

“Considering the fact that we’ve rallied as much as we have coming into the auction and it’s a short day, if it tails, it’s still a success,” Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co., said before the sale. An auction tail is the amount of yield in excess of where the security was trading before the sale.

The current seven-year note yield rose one basis point, or 0.01 percentage point, to 1.22 percent at 11:36 a.m. New York time, according to Bloomberg Bond Trader data. It touched 1.18 percent earlier, the lowest level since Jan. 2.

The yield on the benchmark 10-year note was little changed at 1.85 percent. It touched 1.83 percent earlier, the lowest level since March 4.

The New York-based Securities Industry and Financial Markets Association has recommended that Treasuries trading end at 2 p.m. in advance of the Good Friday holiday and stay closed tomorrow.

Indirect bidders, an investor class that includes foreign central banks, purchased 35.5 percent of the notes, compared with 33.4 percent in February and an average of 39.3 percent at the past 10 sales.

Direct Bidders

Direct bidders, non-primary dealer investors that place their bids directly with the Treasury, purchased 19.5 percent of the notes, compared with the 10-auction average of 16.3 percent.

Seven-year notes have returned 0.3 percent this year, compared with a 0.2 percent decline by Treasuries overall, according to Bank of America Merrill Lynch indexes. The seven-year securities gained 3.9 percent in 2012, while Treasuries overall advanced 2.2 percent.

Today’s offering is the last of three note sales this week. The government sold $35 billion in five-year securities yesterday at a yield of 0.76 percent. The March 26 auction of $35 billion in two-year debt drew a yield of 0.255 percent.

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