Treasury Three-Year Notes May Yield 0.575% at Sale, Survey Shows

The Treasury’s $32 billion sale of three-year notes may draw a yield of 0.575 percent, the highest level since July 2011, according to the average forecast in a Bloomberg News survey of 10 of the Federal Reserve’s 21 primary dealers.

The notes, which mature in June 2016, yielded 0.575 percent in pre-auction trading. The record-low auction yield of 0.327 percent was reached Dec. 11. The amount being offered today is unchanged from the previous 32 sales of the maturity. Bids are due by 1 p.m. New York time.

The May 7 three-year note offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 3.38, after reaching a record 3.96 at the October sale. The average at the past 10 auctions was 3.55.

Indirect bidders, a class of investors that includes foreign central banks, bought 30.7 percent at last month’s sale after being awarded 19 percent of the notes at the April 9 auction of the securities. The average at the past 10 offerings was 25.9 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 14.6 percent at the May sale, compared with 16.2 percent of the securities at the April auction and an average of 19.9 percent at the past 10 auctions. The record-high 26.9 percent was set at the February offering.

Treasury three-year notes have lost 0.2 percent this year, compared with a return of 0.6 percent in 2012, according to Bank of America Merrill Lynch indexes. The broader Treasuries market has declined 1.5 percent this year after gaining 2.2 percent last year.

The Treasury Department is selling $66 billion in notes and bonds this week. It’s due to auction $21 billion of 10-year securities tomorrow and $13 billion of 30-year debt on June 13.

Primary dealers trade government securities with the Fed and are obliged to participate in Treasury sales.

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