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Treasuries Rise After 30-Year Bond Auction Bids Exceed Average

January 9, 2014

Jan. 9 (Bloomberg) -- Treasuries rose after the U.S. auction of $13 billion of 30-year bonds as yields at almost more than two-year highs attracted higher-than-average bids.

The bonds drew a yield of 3.899 percent, compared with the median estimate of 3.914 percent in in a Bloomberg News survey of 10 of the Federal Reserve’s 21 primary dealers. The bid-to- cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.57, the most since October and compared with an average of 2.38 at the past 10 auctions. U.S. debt fluctuated earlier before a government report tomorrow forecast to show the nation’s jobless rate held at a five-year low amid speculation the Fed may further curtail its monthly bond-buying.

"The market isn’t ready to push yields on the long end to much higher and as such the auction was pretty strong after cheapening up into the sale," said Justin Lederer, an interest- rate strategist at Cantor Fitzgerald LP in New York, a primary dealer. "The sector has outperformed on the curve, and as such we could see further flattening."

The current 30-year bond yield fell one basis point, or 0.01 percentage point, to 3.88 percent at 1:31 p.m. in New York, according to Bloomberg Bond Trader prices. The 3.75 percent securities due in November 2043 gained 6/32, or $1.88 per $1,000 face amount, to 97 22/32. The yield reached 3.97 percent on Jan. 2, the highest since August 2011

Benchmark 10-year yields lost one basis point to 2.98 percent. The yield climbed to 3.05 percent on Jan. 2, the highest since July 2011.

 

Auction Detail

 

Indirect bidders, a class of investors that includes foreign central banks, bought 44.4 percent of the bonds, compared with 46 percent of last month’s offering, the most since April 2011. The average at the past 10 offerings was 39.4 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 17.5 percent of the offering, versus 12.5 percent at last month’s sale. The average for the past 10 auctions is 15.6 percent.

The auction was the final of three note and bond offerings this week. The U.S. sold $30 billion of three-year debt on Jan. 7 at a yield of 0.799 percent and $21 billion of 10-year securities yesterday at a yield of 3.009 percent.

Treasury trading volume at ICAP Plc, the largest inter- dealer broker of U.S. government debt, climbed to $424.1 billion yesterday, the highest level since Dec. 19, and above the 2013 average of $308.4 billion.

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