The Treasury Department’s $35 billion sale of two-year notes may draw a yield of 0.314 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 June 2014, yielded 0.313 percent in pre-auction trading. Bids are due by 1 p.m. New York time.
The size of the offering is the same as at the past 20 sales of the two-year maturity after peaking at $44 billion from October 2009 through April 2010.
Last month’s two-year note sale drew a yield of 0.300 percent. The record auction low was 0.222 percent in August.
The May 22 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 3.95. It was the highest since the Nov. 21 auction’s ratio of 4.07, the most for a fixed-coupon U.S. note or bond since the Treasury Department began releasing the data in 1993. The average for the past 10 auctions is 3.71.
Indirect bidders, a class of investors that includes foreign central banks, bought 33.5 percent of the notes at the May sale after purchasing 32.1 percent at the April offering. The average for the past 10 auctions is 34 percent.
Direct bidders, non-primary dealer investors that place their bids directly with the Treasury, purchased 9 percent of the notes at the last sale, compared with an average of 11.8 percent at the past 10.
Two-year notes have returned 0.03 percent this year, compared with a 1.92 percent gain for Treasuries overall, according to Bank of America Merrill Lynch indexes. The two-year securities returned 1.46 percent in 2011, while Treasuries overall gained 9.79 percent.
Today’s offering is the first of three note auctions this week totaling $99 billion. The government will sell $35 billion in five-year debt tomorrow and $29 billion in seven-year securities on June 28.
This week’s note offerings, combined with the June 21 auction of $7 billion in 30-year Treasury Inflation Protected Securities, will raise $49.9 billion of new cash, as maturing securities held by the public total $56.1 billion.
The Fed’s primary dealers trade government securities with the central bank and are obligated to bid in Treasury auctions.
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