July 26 (Bloomberg) -- Treasuries fell as the yield at a seven-year-note sale exceeded forecasts after European Central Bank President Mario Draghi said the ECB was ready to do whatever it takes to preserve the euro, damping safety demand.
Longer maturities led losses as the U.S. sold $29 billion of seven-year securities at an auction record low yield of 0.954 percent in the final of three note sales this week totaling $99 billion. The yields on Spanish debt dropped after climbing to euro-era records this week amid concern its banks’ and region’s debts will force it to seek a bailout.
“There is some hope that positive steps are being taken,” said Aaron Kohli, an interest-rate strategist in New York at BNP Paribas SA, one of the 21 primary dealers obligated to bid in Treasury auctions. “The general rallying trend in Treasuries is still in place. Any selloffs should be met with pretty swift buying.”
The yield on the current seven-year note rose three basis points, or 0.03 percentage point, to 0.93 percent at 2:46 p.m. in New York, according to Bloomberg Bond Trader Prices. The record low in trading was 0.8696 percent on July 25. The yield on the benchmark 10-year note rose three basis points to 1.43 percent after touching an all-time low of 1.3790 percent on July 25.
Today’s auction yield compared with a forecast of 0.948 percent in a Bloomberg News survey of 10 of the Federal Reserve’s primary dealers. The previous auction low yield was 1.075 percent in June.
The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.64, compared with an average of 2.83 for the previous 10 sales.
Indirect bidders, an investor class that includes foreign central banks, purchased 46.3 percent of the notes, the most since August, compared with an average of 39.7 percent for the past 10 sales.
“That’s consistent with ongoing demand triggered by lowered growth estimates for the balance of the year, both domestic and overseas,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. There’s also “the general level of uncertainty triggered by the broader European sovereign-credit issues.”
Direct bidders, non-primary dealer investors that place their bids directly with the Treasury, purchased 7.1 percent of the notes, compared with an average of 14.1 percent at the last 10 auctions.