Foreign Bid For Treasurys Remains Strong
Treasury prices remained lower but were bouncing off session lows Monday afternoon after the $44 billion two-year note auction, the first leg of this week’s record $118 billion government note sales.
The auction was more than three times oversubscribed and demand from foreign investors including foreign central banks remained solid. Demand, though, was down compared with the supply a month ago, which garnered the strongest demand since August 2007.
“The Treasury is having almost no trouble selling its debt regardless of its duration and [Monday's] auction is just the latest in a long line of evidence,” said Dan Greenhaus, chief economic and bond strategist at Miller, Tabak & Co in New York. For now, “Treasury auctions remain as exciting as a really great staring competition,” he said.
Treasury’s two-year note came in at a yield of 0.802%, compared with the 0.798% on the when-issued paper just before the auction. The bid-to-cover ratio, a main gauge of demand, was 3.16, compared with 3.63 for the previous auction in October and 3.23 in September. The average is 3.07 from the past four auctions.
The indirect bid–demand from domestic and foreign institutions, including foreign central banks–for the two-year note auction was 44.5%, unchanged from the October auction’s level and down from 45.2% in September. The average is 43.03% for the last four auctions. The direct bid, a category of bids from nonprimary dealers, banks, money managers and depository institutions who have direct accounts to submit bids to the Treasury auctions, was 4.7%, compared with 26.1% in October and 11.8% in September.
As of 1:14 p.m. EST, the two-year note was 1/32 lower at 100 16/32 to yield 0.74%, the 10-year note was down 8/32 to 99 28/32 to yield 3.39% and the 30-year bond was 12/32 lower to 100 30/32 to yield 4.32%. Bond prices move inversely to their yields.
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Foreign Bid For Treasurys Remains Strong
