Treasury 10-year yield below 2% on Europe debt crisis, jobs data

‘Weaker Data’

France sold 2.7 billion euros of benchmark five-year debt at an average yield of 1.83%, up from 1.78% on March 15. It also sold notes due in September 2014 and April 2015 and index-linked securities.

The bonds sales came amid Spanish Prime Minister Mariano Rajoy’s struggle to meet deficit targets and as the French presidential elections have driven up yields in the euro area.

“Europe is scaring a lot of people again,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, one of 21 primary dealers that trade Treasuries with the Fed. “Things seem to be deteriorating and that brings nervousness into the U.S. Treasury market. You are getting weaker data in the U.S.”

Five-year TIPS yielded negative 1.3% before today’s sale, compared with record low negative 0.877% at the previous auction of the securities on Dec. 15.

Investors bid for three times the amount of securities offered four months ago, compared with an average of 2.63 for the past 10 auctions. Indirect bidders, the category of investors that includes foreign central banks, bought 48.8%. The U.S. previously auctioned a record $14 billion in April 2011.

Debt Auctions

The difference between yields on 10-year notes and same- maturity TIPS, a gauge of trader expectations for consumer prices over the life of the debt, has widened to 2.23 percentage points from 1.95 percentage points at the end of 2011.

The U.S. is scheduled to announce the amount of notes it will auction next week. The auction plan will consist of $35 billion of two-year notes on April 24, the same amount of five- year debt the following day and $29 billion of seven-year debt on April 26, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance.

The Fed plans to buy as much as $2 billion of Treasuries due from August 2022 to February 2031 today as part of a plan to replace $400 billion of shorter-term debt in its holdings with longer maturities to keep borrowing costs down and boost the economy, according to the New York Fed’s website.

Bloomberg News

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