Treasuries fall for 2nd day before $32 billion three-year sale

Trade Levels

Treasury trading volume fell yesterday to $201 billion, the lowest level since Jan. 7, according to ICAP Plc, the largest inter-dealer broker of U.S. government debt. Daily volume averaged $240 billion in 2012

The three-year notes scheduled for sale today yielded 0.42% in pre-auction trading, compared with 0.385% at the previous auction of the securities on Jan. 8. The record-low auction yield was 0.327% in December.

Investors submitted orders to buy 3.62 times the amount of available debt last month, versus 3.36 times in December. The government is also scheduled to sell $24 billion of 10-year notes tomorrow and $16 billion of 30-year bonds on Feb. 14.

“The auction today should come and go, but the market doesn’t have a lot to spark it right now,” said Scott Sherman, an interest-rate strategist at Credit Suisse Group AG in New York, one of 21 primary dealers that trade directly with the Fed. “We’ve moved to a new range, and that is it”

Debt Returns

Treasury three-year notes have handed investors a loss of 0.02% this year, according to Bank of America Merrill Lynch indexes. Ten-year notes declined 1.6% and 30-year bonds slid 3.9%, based on the data.

Economists said a government report tomorrow will show U.S. retail sales increased for a third month in January. U.S. retail sales increased 0.1% last month after a 0.5% advance in December, according to the median forecast of economists surveyed by Bloomberg News before tomorrow’s Commerce Department report.

President Barack Obama will deliver his State of the Union address today as he attempts to persuade lawmakers and voters that his plan to revive growth and bring down unemployment will succeed.

“I’m going to be talking about making sure that we’re focused on job creation here in the United States of America,” he said last week to House Democrats at a meeting in Virginia.

The 10-year note will yield 1.97% at the end of June and 2.24% by Dec. 31, according to the weighted average forecast of economists in a Bloomberg survey.

Bloomberg News

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