Treasury Two-Year Notes May Yield 0.322% at Auction, Survey Says

The Treasury Department’s $32 billion sale of two-year notes may draw a yield of 0.322 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 October 2015, yielded 0.330 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s sale of the securities yielded 0.348 percent, and the record auction low was 0.22 percent on July 24, 2012.

The size of today’s offering was cut by $1 billion for the third straight month, the longest stretch of reductions since October 2010. The amount of the securities sold each month peaked at $44 billion from October 2009 through April 2010.

The Sept. 24 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 3.09, down from 3.21 the previous month. The average ratio for the past 10 auctions was 3.31.

Indirect bidders, a class of investors that includes foreign central banks, bought 24 percent of the securities at the September sale. The average for the past 10 auctions is 23 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 21.8 percent of the notes at the last sale, compared with an average of 22.4 percent at the past 10 sales.

Two-year notes have returned 0.3 percent this year, compared with a loss of 1.8 percent by the broad Treasuries market, according to Bank of America Merrill Lynch indexes. The two-year securities gained 0.3 percent in 2012, while Treasuries in total rose 2.2 percent.

Today’s offering is the first of three note auctions this week totaling $96 billion. The government will sell $35 billion in five-year debt tomorrow and $29 billion in seven-year securities on Oct. 30.

The Fed’s primary dealers trade government securities with the central bank and are obligated to bid in Treasury auctions.

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