Bloomberg News

U.S. 7-Year Notes May Yield Record 0.948% at Sale, Survey Says

July 26, 2012

The Treasury Department’s $29 billion sale of seven-year notes may draw a record low yield of 0.948 percent, according to the average forecast in a Bloomberg News survey of 10 of the Federal Reserve’s 21 primary dealers.

The securities, which mature in July 2019, yielded 0.938 percent in pre-auction trading. Bids are due by 1 p.m. New York time. Last month’s seven-year note sale drew a record low yield of 1.075 percent.

The size of today’s offering is the same as at the past 24 sales of the maturity after peaking at $32 billion from November 2009 through April 2010.

The June 28 offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.64, down from 2.8 in May. The average for the past 10 auctions is 2.83.

Indirect bidders, a class of investors that includes foreign central banks, bought 42 percent of the notes at the June sale after purchasing 42.7 percent in May. The average for the past 10 offerings is 39.7 percent.

Direct bidders, non-primary dealer investors that place their bids directly with the Treasury, purchased 6.5 percent of the notes at the last sale, compared with an average of 14.1 percent at the past 10.

Yearly Returns

Seven-year notes have returned 4.5 percent this year, compared with a 3.2 percent gain by Treasuries overall, according to Bank of America Merrill Lynch indexes. The seven- year securities returned 13.7 percent in 2011, while Treasuries overall gained 9.8 percent.

Today’s offering is the third of three note auctions this week totaling $99 billion. The government sold $35 billion of two-year notes on July 24 at a record low yield of 0.22 percent and the same amount of five-year notes yesterday at a record low yield of 0.584 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.

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net


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