U.S. 10-Year Note Auction May Yield 2.67 Percent, Survey Says

The Treasury’s $21 billion sale of 10-year notes may draw a yield of 2.67 percent, according to the average forecast in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers.

The securities, which mature in August 2023, yielded 2.67 percent in pre-auction trading. Bids are due by 1 p.m. New York time. The yield at the 10-year debt offering on Sept. 11 was 2.946 percent, the highest since June, 2011. The record-low auction yield was 1.459 percent in July 2012.

The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.86 at last month’s sale, versus an average of 2.76 at the past 10 auctions.

Indirect bidders, a class of investors that includes foreign central banks, bought 36.6 percent of the notes at the September sale, versus 46.3 percent in August. The average at the past 10 offerings was 37.3 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 29.6 percent of the securities at last month’s sale. The average for the past 10 auctions is 23.1 percent.

Ten-year notes have lost 5.6 percent this year, compared with a 2.5 percent drop in the broader U.S. Treasuries market, according to Bank of America Merrill Lynch indexes. The benchmark notes returned 4.2 percent in 2012, versus a 2.2 percent gain by Treasuries overall.

The auction is the second of three offerings this week as the government sells $64 billion of notes and bonds. The U.S. sold $30 billion of three-year debt yesterday at a yield of 0.71 percent and will auction $13 billion of 30-year bonds tomorrow.

The sales will raise $31.7 billion of new cash, as maturing securities held by the public total $32.3 billion, according to the U.S. Treasury.

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

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