Treasurys strengthen on high demand for 7-yr notes

AP News
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Posted: Nov 25, 2009 5:49 PM

Treasury prices mainly rose Wednesday after a strong auction for seven-year notes. Bond prices had slumped earlier in the day on rising stocks and upbeat reports on the economy.

Demand was strong for the $32 billion in seven-year notes sold, similar to other auctions earlier in the week. The bid-to-cover ratio was 2.76, in line with sales in recent months for bonds with a similar maturity.

The price of the seven-year note, which was reintroduced this year as the government ramped up spending, rose 6/32 to 102 65/32. That pushed its yield down to 2.76 percent in late trading from 2.81 percent late Tuesday.

A lack of concern about near-term inflation risk and investors looking for safe investments to store cash for the end of the year has helped buoy Treasury prices in recent weeks and drive demand for government debt issues.

The government sold $42 billion in five-year notes on Tuesday. Demand at that auction was the highest for any sale of five-year notes since 2007. The Treasury Department also sold two-year notes and three-month and six-month bills on Monday.

Treasury prices were lower throughout the morning as stocks rallied on upbeat reports about jobs and consumer spending. A weakening dollar also helped lift stocks.

In economic news, weekly jobless benefit claims fell more than expected to 466,000, the lowest level since September of 2008. Consumer spending grew by a more-than-expected 0.7 percent in October.

The bond market will be closed Thursday for Thanksgiving and will close early Friday.

In other trading, the price on the 10-year note, which is often used as a benchmark for consumer loans, rose 8/32 to 100 26/32. Its yield fell to 3.28 percent from 3.31 percent.

The price of the 30-year bond rose 6/32 to 102 8/32. Its yield dipped to 4.24 percent from 4.26 percent.

The yield for three-month T-bills was flat at 0.03 percent. Its discount rate was 0.04 percent.

The cost of borrowing between banks fell. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ fell to 0.2556 percent from 0.2606 percent.