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Third U.S. Note Auction This Week Shows No Charm

Wednesday, 29 Jun 2011 01:33 PM

A third U.S. Treasury note auction Wednesday rounded out a rough week for U.S. government debt sales as a recent rise in yields failed to attract significant bidding interest.

The high yield in the sale of $29 billion of seven-year notes came in at 2.43 percent, above where the notes were trading in the when-issued market, showing investors were aggressive in attempts to undercut prices.

Indirect bidders, including foreign central banks, bought 32 percent of the notes at auction, the second-lowest level since the seven-year notes were reintroduced in February, 2009.

"Dealers took, or were graced with, the highest share of a seven-year auction since May 2009 and indirects were way below recent averages. A clean sweep of relatively lousy auctions this week will keep rates capped — barring some unforeseen externality," said William O'Donnell, head of U.S. Treasury strategy at RBS Securities in Stamford, Connecticut.

Bond yields have been rising this week with some expectations that Greece will be able to stave off a default with a bailout package, although yields in general remain only a little above six-month lows.

Sales of $35 billion of two-year notes Monday and $35 billion of five-year notes Tuesday also met tepid demand.

© 2015 Thomson/Reuters. All rights reserved.

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