Treasury drops billions in securities

November 24, 2014 04:24 AM

Treasuries fell for the first time in three days before the United States sells $28 billion of two-year securities, the first offering in auctions this week of $105 billion of notes.

The debt being sold today yielded 0.555% in pre-auction trading. The Treasury last sold the securities on Oct. 28 to yield 0.425%, the lowest since May. Ten-year yields traded in the tightest range in two months before a report tomorrow forecast to show the U.S. economy grew less than estimated in the third quarter.

It’s “a supply concession,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, one of 22 primary dealers that trade with the Federal Reserve. Treasuries will remain “in a range.”

Ten-year yields rose two basis points, or 0.02 percentage point, to 2.33% at 9:27 a.m. New York time, according to Bloomberg Bond Trader data. The 2.25% note due November 2024 fell 6/32, or $1.88 per $1,000 face amount, to 99 10/4. The yield dropped five basis points in the previous two days.

The benchmark note yield traded between 2.30% and 2.33%, the narrowest since Sept. 22. The security has yielded from 2.27% to 2.40% this month, according to data compiled by Bloomberg. Two-year note yields have traded between 0.48% and 0.56%.

The Bloomberg U.S. Treasury Bond Index has advanced 0.3% this month through Nov. 21. It has gained 5.2% in 2014.

Trading in Treasuries opened in London after being shut in Japan today for a holiday.

Market Close
The market is scheduled to close worldwide on Nov. 27 for a U.S. holiday, according to a recommendation by the Securities Industry and Financial Markets Association. It will end at 2 p.m. New York time Nov. 28, the group’s website shows.

The Treasury’s auction of two-year notes last month drew a bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, of 3.11, the lowest since September 2013.

The securities yielded 0.589% at the Sept. 23 offering, the highest level since April 2011.

The U.S. plans to auction $13 billion of two-year floating- rate debt and $35 billion of five-year securities tomorrow. It will conclude the week’s auctions with a $29 billion seven-year sale on Nov. 26.

Cheapen Further
“Recent two-year auctions have cleared close to market levels despite a strong increase in demand from foreign and domestic fund investors,” Moyeen Islam, a London-based fixed- income strategist at the primary dealer Barclays Plc, wrote in a note today. While current two-year notes have cheapened, “experience over the past few auction cycles suggests that there is room for it to cheapen further ahead of today’s supply,” Islam said.

The U.S. government will revise its figure for third-quarter growth in gross domestic product to 3.3% from the 3.5% that it estimated in October, economists surveyed by Bloomberg News forecast before the report tomorrow.

Durable goods orders fell 0.6% in October from September, based on the responses to a separate Bloomberg survey. The report is scheduled for Nov. 26.

China cut interest rates last week for the first time since 2012. The Bank of Japan in October increased the target of government debt it buys. European Central Bank President Mario Draghi said last week that policy makers must drive euro-area inflation higher quickly and will broaden their asset-purchase program if needed.

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