The Treasury’s $35 billion sale of five-year notes may draw a record low yield of 0.582 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 July 2017, yielded 0.578 percent in pre-auction trading, compared with 0.752 percent at the previous offering on June 27. The record auction low was 0.748 percent in May. Bids are due by 1 p.m. New York time.
The size of the offering is the same as at the past 22 five-year note sales after peaking at $42 billion from November 2009 through April 2010.
The June auction’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.61, down from 2.99 in May. The average ratio for the past 10 auctions is 2.96.
Indirect bidders, a class of investors that includes foreign central banks, bought 35.1 percent of the notes at the June sale after purchasing 42.6 percent in May. The average for the past 10 offerings is 44.3 percent.
Direct bidders, non-primary dealer investors that place their bids directly with the Treasury, purchased 10.7 percent of the notes at the last sale, compared with an average of 10.9 percent at the past 10.
Five-year notes have returned 2.3 percent this year, compared with a 3.2 percent gain by Treasuries overall, according to Bank of America Merrill Lynch indexes. The five- year securities returned 9.2 percent in 2011, while Treasuries overall gained 9.8 percent.
Today’s offering is the second of three this week totaling $99 billion. The government will sell $29 billion in seven-year securities tomorrow. Yesterday’s auction of $35 billion in two- year notes yielded a record low 0.22 percent.
This week’s note offerings, combined with the July 19 auction of $15 billion in 10-year Treasury Inflation Protected Securities, will raise $60.6 billion of new cash, as maturing securities held by the public total $53.4 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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