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Treasury Makes History With First Two-Year Note Auction Premium

  • Fed policy keeps short rates near lows while bond yields surge
  • Tuesday’s auction is first nominal new issue priced above par
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Long-term U.S. Treasury yields may be surging lately, but investors were served a reminder Tuesday of just how incredibly low short-end rates still are.

The department’s $60 billion sale of two-year notes on Tuesday broke one of the few remaining records of the low interest-rate era when it drew a yield of 0.119%. Because Treasury notes and bonds by regulation have a minimum coupon rate of 0.125%, the yield below that level means the notes were sold at a premium above 100 cents on the dollar -- 100.011965, to be precise -- something that’s never happened before.