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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (25376)	12/10/2009 11:22:38 AM
From: carranza2	Respond to of 71456

B'berg: Treasuries Fall After $21 Billion Auction of 10-Year Notes Share Business ExchangeTwitterFacebook\| Email \| Print \| A A A By Cordell Eddings and Susanne Walker Dec. 9 (Bloomberg) -- Treasuries declined for the first time in three days after an investor group that includes foreign central banks bought the least amount of 10-year notes since June at today’s $21 billion auction of the securities. Yields on debt maturing in 10 years increased as indirect bidders won 34.9 percent of the debt, compared with an average of 45.6 percent since the Treasury made changes in June on how bids are classified. The so-called reopening of the notes originally sold in November was the second of three note and bond sales this week totaling $74 billion. “It was a pretty sloppy auction,” said Ira Jersey, an interest-rate strategist in New York at Royal Bank of Canada, one of the Federal Reserve’s 18 primary dealers required to bid on Treasury sales. “We didn’t build in a concession prior to the auction and because of that we had the concession in the auction.” The yield on the 10-year note rose four basis points to 3.43 percent at 4:20 p.m. in New York, according to BGCantor Market Data. The 3.375 percent security maturing in November 2019 fell 10/32, or $3.13 per $1,000 face amount, to 99 18/32. The notes drew a yield of 3.448 percent, compared with the average forecast of 3.421 percent in a Bloomberg News survey of seven primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.62, compared with an average of 2.63 at the past 10 auctions. ‘Not a Shot’ “This is not a shot across the U.S. Treasury markets bow that some market pundits might say it is,” wrote George Goncalves, chief fixed-income rates strategist in New York at primary dealer Cantor Fitzgerald LP, in a note. “This auction cleared in a low volume period of December and at the end of the day as sovereign debt markets go (especially versus the likes of the smaller debt issuers out of Europe) one can not beat the UST market.” The Treasury modified its auction rules on June 1 with regard to so-called guaranteed-bid arrangements between dealers and customers in a way that may have increased indirect bids. Prior to the change, dealers could submit direct bids while actually fulfilling a guarantee to a customer to sell a specified amount of securities at an agreed-upon price. U.S. government securities returned 2.74 percent since June, according to Bank of America Corp.’s Merrill Lynch U.S. Treasury Master Index, as the Fed signaled it would keep interest rates near record lows amid signs recovery from the worst slump since the Great Depression would be slow. The securities dropped 4.46 in the first half of the year, the worst since at least 1978, as President Barack Obama borrowed record amounts to fund spending programs. ‘Under Pressure’ U.S. marketable debt rose to a record $7.17 trillion in November. The federal budget deficit in the last fiscal year was a record $1.4 trillion and is forecast to be about the same size this fiscal year. “People are looking at what’s going on with deficits and that over time, the long end is going to be under pressure as fiscal policy has a question mark,” said Thomas Tucci, head of U.S. government bond trading at RBC Capital in New York. Two-year notes fell on Dec. 4 by the most since August after the U.S. economy lost fewer jobs than forecast last month. The yield had dropped below levels seen the day before the payrolls report after Fed Chairman Ben S. Bernanke said on Dec. 7 that the economy faces “significant headwinds”. “We still have a 10 percent jobless rate so what’s the Fed going to do?,” said David Robin, an interest-rate strategist in New York at Newedge USA LLC, an institutional brokerage firm. “Not much. Bernanke told you that there’s a long way to go before sustainability and before there’s any comfort that what’s happening is going to give them reason to react from a rate standpoint.” Taking Notice Treasuries rose earlier after Standard & Poor’s cut the credit outlook for Spain to “negative” from “stable.” Fitch Ratings cut Greece’s credit rating yesterday. “The ratings agencies seem to be taking notice of the high ratio of GDP to outstanding debt in some countries and it’s something the market is taking note of,” said Thomas L. di Galoma, head of U.S. rates trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. The spread between yields on 2-year and 30-year Treasuries touched 366 basis points as the U.S. prepares to sell $13 billion of bonds tomorrow. The last time the spread was so large was 1992, when the Fed cut interest rates. At the last sale of 30-year bonds, a record $16 billion offering on Nov. 12, investors bid for 2.26 times the amount of securities offered, the lowest level since May. Indirect bidders bought 44 percent of the bonds.