U.S. Three-Year Note Sale May Yield 0.925%, Dealer Survey Shows

The Treasury Department’s $27 billion sale of three-year notes may draw a yield of 0.925 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 August 2017, yielded 0.930 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s sale of the debt yielded 0.992 percent, the highest since the May 2011 offering. The record auction low was 0.327 percent in December 2012.

The size of today’s auction was unchanged from the last sale, after declining by $1 billion a month in May, June and July. The U.S. sold $30 billion of three-year notes a month at offerings from October through April. The amount peaked at $40 billion from November 2009 through April 2010.

The July 8 three-year note auction’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 3.38, down from 3.41 the prior month. The average ratio for the past 10 auctions was 3.35.

Indirect bidders, a class of investors that includes foreign central banks, bought 38.2 percent of the notes at the July sale, up from 26.5 percent in June. The average for the past 10 auctions is 32.6 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 12.7 percent of the notes at the last sale. The average at the past 10 offerings was 18.6 percent.

Note Return

Three-year notes have returned 0.8 percent this year, compared with a gain of 3.7 percent by the broader Treasuries market, according to Bank of America Merrill Lynch indexes. The three-year securities lost 0.1 percent in 2013, while Treasuries overall fell 3.4 percent.

Today’s offering is the first of three note and bond auctions this week totaling $67 billion. The government will sell $24 billion in 10-year securities tomorrow and $16 billion in 30-year debt on Aug. 14.

The sales will raise $9.3 billion of new cash, as maturing securities held by the public total $57.7 billion, according to the U.S. 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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