Treasury Five-Year Notes May Yield 1.613% at Sale, Survey Shows

The Treasury Department’s $35 billion sale of five-year notes may draw a yield of 1.613 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 November 2019, yielded 1.615 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s sale of the notes yielded 1.567 percent, the lowest since May.

The size of the offering is the same as at the past 50 auctions of five-year notes after peaking at $42 billion from November 2009 through April 2010.

The Oct. 29 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.36, the lowest since July 2009. The average at the past 10 auctions was 2.74.

Indirect bidders, a class of investors that includes foreign central banks, bought 47.8 percent of the notes at the October sale, compared with the average of 49.3 percent at the past 10 offerings.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 10.5 percent of the notes at the last sale, versus an average 13.7 percent at the past 10.

Five-year notes have returned 3 percent this year, versus a gain of 5.1 percent by the broad Treasuries market, according to Bank of America Merrill Lynch bond indexes. The five-year securities lost 2.4 percent in 2013, while Treasuries overall fell 3.4 percent.

Week’s Auctions

The government sold $13 billion in two-year floating-rate notes earlier. It auctioned $28 billion in two-year notes yesterday at a yield of 0.542 percent, and it will offer $29 billion in seven-year notes tomorrow.

The four note sales, plus a $13 billion auction of 10-year Treasury Inflation Protected Securities last week, will raise $39.7 billion of new cash, as maturing securities held by the public total $78.3 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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