Treasury Five-Year Notes May Yield 1.727% at Sale, Survey Shows

The Treasury Department’s $35 billion sale of five-year notes may draw a yield of 1.727 percent, according to the average forecast in a Bloomberg News survey of six of the Federal Reserve’s 22 primary dealers.

The securities, which mature in July 2019, yielded 1.725 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s sale of the notes yielded 1.67 percent. The size of the offering is the same as at the past 46 auctions of five-year notes after peaking at $42 billion from November 2009 through April 2010.

The June 25 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.74, versus an average of 2.72 at the past 10 auctions.

Indirect bidders, a class of investors that includes foreign central banks, bought 52.5 percent of the notes at the June sale, compared with the average of 46.1 percent at the past 10 offerings.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 9.3 percent of the notes at the last sale, versus an average of 12.8 percent at the past 10.

Five-year notes have returned 1.7 percent this year, versus a gain of 3.3 percent by the broad Treasuries market, according to Bank of America Merrill Lynch indexes. The five-year securities lost 2.4 percent in 2013, while Treasuries overall fell 3.4 percent.

Note Auctions

Today’s offering is the second of four auctions of coupon-bearing debt this week. The government sold $29 billion in two-year notes yesterday at a yield of 0.544 percent, the highest in more than three years. It will offer $29 billion in seven-year notes and $15 billion in two-year floating-rate notes tomorrow.

The sales, plus a $15 billion auction of 10-year Treasury Inflation Protected Securities on July 24, will raise $48.1 billion of new cash, as maturing securities held by the public total $74.9 billion, according to the Treasury.

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

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