Fed Chairman Ben S. Bernanke said if job gains continue and inflation increases, “I imagine we’ll continue to do, probably at each meeting, a measured reduction” in purchases.
Seven-year notes have lost 3.8% this year, versus a drop of 2.9% for Treasuries overall, according to Bank of America Merrill Lynch indexes. The seven-year securities returned 3.9% in 2012, while Treasuries overall gained 2.2%.
The government sold $32 billion in two-year debt on Dec. 17 at a yield of 0.345%, $35 billion in five-year securities yesterday at a yield of 1.6% and $16 billion in five-year inflation-linked notes earlier today at a yield of negative 0.375. Holders of TIPS receive an adjustment to the principal value of their securities equal to the change in the consumer price index, in addition to a fixed rate of interest that’s smaller than the interest paid to a holder of conventional debt.
The sales will raise $45.8 billion of new cash, as maturing securities held by the public total $66.2 billion, according to the U.S. Treasury.
“The market is a bit fatigued by all the supply it’s had to take down in a week where you also had to deal with the uncertainty of the Fed and the ensuing taper,” said Justin Lederer, an interest-rate strategist at Cantor Fitzgerald LP in New York, a primary dealer.
Investors bid $2.87 for each dollar of the $2.14 trillion in U.S. government notes and bonds sold at auction this year, according to Treasury data compiled by Bloomberg. That’s down from the record $3.15 for the $2.153 trillion sold at last year’s offerings.