Treasury Seven-Year Notes May Yield 2.120% at Sale, Survey Shows

The Treasury Department’s $29 billion sale of seven-year notes may draw a yield of 2.120 percent, according to the average forecast in a Bloomberg News survey of five of the Federal Reserve’s 22 primary dealers.

The securities, which mature in December 2021, yielded 2.120 percent in pre-auction trading. Bids are due by 11:30 a.m. New York time. Last month’s sale yielded 1.960 percent.

The size of today’s offering is the same as at the past 53 sales of seven-year notes after peaking at $32 billion from November 2009 through April 2010.

The Nov. 26 auction’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.63, the highest since February. The average ratio at the past 10 sales was 2.56.

Indirect bidders, a class of investors that includes foreign central banks, bought 50 percent of the notes at last month’s offering, the most since August 2011. The average at the past 10 sales was 45.5 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 12.8 percent of the notes at the last sale. The average at the past 10 was 19.1 percent.

Seven-year notes have returned 5.6 percent this year, versus a 5.4 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.

The auction is the final of four U.S. note offerings this week. The Treasury auctioned $27 billion in two-year securities Dec. 22 at a yield of 0.703 percent and $35 billion of five-year debt yesterday at a yield of 1.739 percent. It also sold $13 billion of two-year floating-rate notes yesterday.

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

Before it's here, it's on the Bloomberg Terminal.