Treasury Seven-Year Notes May Yield 2.136% at Sale, Survey Says

The Treasury Department’s $29 billion sale of seven-year notes may draw a yield of 2.136 percent, according to the average forecast in a Bloomberg News survey of 10 of the Federal Reserve’s 22 primary dealers.

The securities, which mature in June 2021, yielded 2.140 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s sale yielded 2.010 percent, the lowest level since October.

The size of today’s offering is the same as at the past 47 sales of seven-year notes after peaking at $32 billion from November 2009 through April 2010.

The May 29 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.6. The average at the past 10 auctions was 2.55.

Indirect bidders, a class of investors that includes foreign central banks, bought 40.4 percent of the notes at the May sale, the lowest since November 2013, compared with an average of 42.2 percent at the past 10 sales.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 24.1 percent of the notes at the last offering. The average at the past 10 auctions was 21.8 percent.

Seven-year notes have returned 3.4 percent this year, versus a 2.9 percent gain by the broad Treasuries market, according to Bank of America Merrill Lynch indexes. The seven-year securities lost 4.8 percent in 2013, while Treasuries overall fell 3.4 percent.

Week’s Offerings

Today’s offering is the final of four fixed-coupon note auctions this week. The government sold $35 billion of five-year notes yesterday at a yield of 1.67 percent. It auctioned $30 billion of two-year notes on June 24 at a yield of 0.511 percent, the highest in more than three years. It also sold $13 billion of two-year floating-rate notes yesterday at a high discount margin of 0.069 percent.

The sales, plus a $7 billion offering of 30-year Treasury Inflation Protected Securities on June 19, will raise $40.6 billion of new cash, as maturing securities held by the public total $73.4 billion, according to the U.S. Treasury.S

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

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