3-year-note auction attracts buyers

The yield is the highest since September, but demand is strong. A $21 billion auction of 10-year notes comes Wednesday.

By Charley Blaine Apr 6, 2010 1:58PM
The first of three auctions of Treasury notes produced decent results today, and interest rates moved lower as a  result.

But more difficult auctions -- of 10-year notes and 30-year bonds -- are still to come.
A $40 billion issue of 3-year notes sold at a yield of 1.776%. That was the highest yield since September, but Marketwatch.com said it was close to what the market had expected.

Better, the bid-to-cover ratio, a key measure of investor demand, was a healthy 3.1-to-1. So, for every dollar of notes sold, there were $3.10 in bids. Indirect bidders, mostly central banks, bought 52% of the issue.

The results cheered the bond market. Yields fel, and prices, which move in the opposite direction as yields, moved up. The publicly traded 3-year note yield was down to 1.718% from 1.743% on Monday.

The 10-year Treasury was yielding 3.968%, down from Monday's 3.994%. The yield briefly moved over 4% on Monday for the first time since June.

The iShares Barclays 7-10 year Treasury (IEF) exchange-traded fund was up 0.2% to $88.44.

A $21 billion issue of 10-years will be sold on Wednesday. This will be closely watched because the 10-year note is the foundation on which mortgage rates are built.

A $13 billion offering of 30-year bonds will be sold on Thursday.

The bond market was roiled when auctions of longer-term notes in March generated less-than-expected demand and yields rose as a result.

The fear was that the results were a signal of buyer resistance to the billions of dollars of securities that the Treasury has forced to sell to finance federal government operations.
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