Treasury gets strong bidding for $29B in bonds

AP News
Posted: Oct 28, 2010 5:22 PM
Treasury gets strong bidding for $29B in bonds

The Treasury borrowed $29 billion from investors in the last auction of government bonds this week.

The Treasury sold seven-year notes at a 1.97 percent yield, versus 1.89 percent in September's auction. That means it was slightly more expensive for the government to borrow from investors this month.

But the extra yield also helped stoke demand, said David Ader, head of government bond strategy at CRT Capital. Investors placed bids for 3.06 times the amount offered, a record high reading of demand for a sale of seven-year notes.

The seven-year Treasury traded with a 1.69 percent yield at the start of October. The sell-off since then pushed the yield up, as bond prices and yields move in opposite directions, and lured buyers to the auction.

The Treasury raised a total of $109 billion from investors this week. In earlier auctions, the government managed to borrow at the cheapest rates on record for two-year notes and five-year inflation-protected bonds. The inflation-protected bonds caught the public's attention for selling at a negative yield.

All Treasurys were trading higher. The seven-year note jumped after the auction, lowering the yield to 1.93 percent in late afternoon trading.

The 10-year note gained 50 cents on the dollar to $99.65. The rising price dropped the yield to 2.66 percent from 2.72 percent late Wednesday. The yield on the 30-year bond remained at 4.05 percent.

The yield on the two-year note edged lower, from 0.41 percent to 0.37 percent.

In the Treasury bill market, the three-month T-bill paid a 12 percent yield at a discount of 13 percent.