Treasury Prices Improve After $42 Billion 5-Year Note Auction
By Min Zeng
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The Treasury market prices improved Tuesday afternoon in thin trade following a $42 billion five-year note auction, the second leg of this week's $118 billion government note supply.
Similar to the $44 billion two-year note auction Monday, strong demand from U.S.-based banks and deposit-taking institutions that can submit bids directly with the Treasury--direct bidders--helped offset a weaker showing by large institutional investors, including foreign central banks, known as indirect bids.
(overseas apetite seems to be waning - or is this temporary?)
After the auction, buyers emerged to push prices of shorter-maturities from session lows. The 30-year bond was the outperformer.
The indirect bid--a proxy for foreign demand--for the five-year note auction was 44%, compared with 60.9% in November and 54.8% in October.
The average is 54.2% for the last four auctions. The direct bid was 13% compared to 2.9% in November.
The auction drew bids that were 2.59 times the amount on offer. The so-called bid-to-cover ratio, while below 2.81 in November and 3.63 in October, matched the average of the past four auctions.
As of 1:29 p.m. EST, the two-year Treasury note was flat at 99 25/32 to yield 1.1%, the five-year note was flat at 97 27/32 to yield 2.60%, the 10-year note was up 1/32 at 96 7/32 to yield 3.84%, and the 30-year bond was 11/32 higher to 95 3/32 to yield 4.68%. Bond prices move inversely to their yields.
Bond yields have jumped significantly over the past week as rising optimism on the U.S. economy for the coming year encouraged investors to seek higher returns in riskier assets.
Low-risk Treasurys tend to fare better when the economy is in distress.
The yields on the two-year, five-year and 10-year notes earlier Tuesday touched the highest level since mid-August. The two-year note's yield rose back above 1% Monday for the first time since October.
Ian Lyngen, senior government bond strategist at CRT Capital Group LLC, noted that last week's supply-accommodation driven selloff has brought bond yields back to mid-summer highs but "the low liquidity, volatile nature of year-ends reminds us that the prices have changed more than the facts."
"This leaves us content to reserve judgment until cooler heads have prevailed in the first weeks of January, when the market will either confirm or reject the recent down trade--recalibrating the departure point of 2010," he said.
-By Min Zeng, Dow Jones Newswires; 212-416-2229; min.zeng@dowjones.com |
