U.S. 10-year yield falls most since November on Italy’s vote

Bid Pattern

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 31.6 percent of the notes at the sale, compared with an average of 18.84 percent for the past 10 auctions.

Indirect bidders, an investor class that includes foreign central banks, purchased 22 percent of the notes, compared with an average of 28.13 percent for the past 10 sales.

“With the level of interest rates, there are fewer reasons to be involved in those securities,” said Thomas di Galoma, a managing director at Navigate Advisors, a brokerage for institutional investors in Stamford, Connecticut. “If one was to look at better value on the curve you’d probably opt for longer dated maturities.”

Two-year notes have returned gained 0.03 percent this year, after returning 0.28 percent last year, according to Bank of America Merrill Lynch indexes.

Auction Reading

“The auction, overall, fit in with the recent 2-year note auctions,” said Thomas Simons, a government debt economist in New York at Jefferies Group Inc., a primary dealer. “The bid- to-cover ratio was sort of low. But when you consider the fact that the auction sold at the yield it did and we have a strong buy-side bid, it still was positive.”

The Treasury is selling $99 billion in notes and bonds this week. It’s due to auction $35 billion of 5-year securities tomorrow and $29 billion of 7-year debt on Feb. 27.

Treasuries rallied as preliminary results from Italian elections show former Prime Minister Silvio Berlusconi may have built a blocking minority in the Senate to deny outright victory to opponent Pier Luigi Bersani. Italy’s 10-year yield rose four basis points, or 0.04 percentage point, to 4.49 percent, after falling as much as 28 basis points, the most since Aug. 3.

Fed Chairman Ben S. Bernanke testifies before lawmakers tomorrow and the following day. Bernanke’s two-day testimony begins tomorrow at 10 a.m. in the Senate and continues Feb. 27 in the House.

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