Bloomberg News

U.S. 7-Year Note Sale May Yield 1.572%, Survey Says

March 29, 2012

The Treasury Department’s $29 billion sale of seven-year notes may draw a yield of 1.572 percent, according to the average forecast in a Bloomberg News survey of nine of the Federal Reserve’s 21 primary dealers.

The securities, which mature in March 2019, yielded 1.575 percent in pre-auction trading. Bids are due by 1 p.m. New York time. The notes drew a record low yield of 1.359 percent at the January auction.

The size of today’s offering is the same as at the past 20 sales of the maturity after peaking at $32 billion in auctions from November 2009 to April 2010.

The Feb. 23 sale’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 3.11, versus an average of 2.86 for the past 10 auctions.

Indirect bidders, a class of investors that includes foreign central banks, bought 41.8 percent of the notes at the February auction, the most since the December offering and compared with an average of 40.2 percent for the past 10 sales.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 19.3 percent of the notes at the last offering, the most since sales of the maturity resumed in 2009 and compared with the 10-auction average of 13 percent.

Loss in 2012

Treasury seven-year notes have lost 0.9 percent this year after returning 14 percent in 2011, according to a Bank of America Merrill Lynch index. The overall Treasury market has fallen 1.2 percent this year after gaining 9.8 percent in 2011.

Today’s offering is the third of three auctions of U.S. notes this week totaling $99 billion. The Treasury sold $35 billion of five-year debt yesterday at a yield of 1.040 percent and the same amount of two-year securities on March 27 at 0.340 percent.

This week’s note auctions will raise $39.5 billion of new cash as maturing securities held by the public total $59.5 billion.

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

To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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