Treasury 10-year note yields touched the lowest level in almost three weeks as political turmoil in Ukraine boosted demand for safety and investors weighed prospects for the U.S. economy.
Bonds remained higher as the government sold $29 billion in seven-year notes to the highest demand in more than a year. Treasuries headed for the biggest two-month gain in almost two years, returning 2 percent in 2014 according to indexes compiled by Bloomberg. Federal Reserve Chair Janet Yellen told lawmakers it’s difficult to discern just how much the harsh weather this winter has affected the economy.
“It’s a safe-haven bid based on what’s going on in the Ukraine,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. “That’s put a bid in the Treasury market. Economic data today was a bit of a mixed bag. Those numbers take a back seat to the geopolitical risk.”
The benchmark 10-year yield fell two basis points, or 0.02 percentage point, to 2.65 percent at 1:34 p.m. New York time, according to Bloomberg Bond Trader data. It touched 2.63 percent, the lowest since Feb. 7.
Current seven-year note yields declined two basis points to 2.09 percent and touched 2.07 percent, the lowest since Feb. 5.
The Bloomberg U.S. Treasury Bond Index, on track for a monthly decline until this week’s surge, has gained 0.2 percent in February.
The seven-year notes auctioned today yielded 2.105 percent, the lowest since October, compared with a forecast of 2.113 percent in a Bloomberg News poll of 10 of the Federal Reserve’s 22 primary dealers.
The bid-to-cover ratio, which gauges demand by comparing total bids with the amount offered, was 2.72, matching the level at the December 2012 offering. The average at the past 10 sales was 2.56.
Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 24.6 percent of the notes at the sale, the most on record. That compared with an average of 19 percent at the past 10 sales.
Indirect bidders, a class of investor that includes foreign central banks, bought 41.1 percent of the notes, versus an average of 42.4 percent at the past 10 auctions.
“The auction was very strong,” said Stanley Sun, a New York-based strategist at Nomura Holdings Inc., which as a primary dealer is obligated to bid in U.S. debt sales. “Seven- year notes were rich, and they still did well, which shows there is real demand for the sector.”
Today’s offering was the final of four note auctions this week totaling $109 billion, including yesterday’s sale of $13 billion of two-year floating-rate securities at a high discount margin of 0.064 percent.
The government sold $35 billion of five-year notes yesterday to stronger-than-average demand. Investors submitted bids for 2.98 times the amount offered, up from 2.59 times at the previous sale on Jan. 30. It auctioned $32 billion of fixed- rate two-year notes Feb. 25 at a yield of 0.34 percent.
Gunmen occupied parliament and the government building in Ukraine’s Crimea region as lawmakers in the capital approved a new cabinet after last week’s ouster of Viktor Yanukovych. Lawmakers in Kiev backed opposition leader Arseniy Yatsenyuk as interim premier so he can begin loan talks to stave off default. Russia put fighter jets on combat alert as part of a drill, Interfax said, citing the Defense Ministry.
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