2-year Treasurys auctioned at record low yield

AP News
Posted: Aug 23, 2011 5:59 PM
2-year Treasurys auctioned at record low yield

Two-year Treasury notes drew record-low yields at a government auction Tuesday.

The notes drew a yield of 0.222 percent, the Treasury Department said.

More investors bid for each note compared with other recent auctions. There were 3.44 dollars bid for every dollar of notes sold, compared to an average ratio of 3.19 over the past four auctions, according to data from CRT Capital Group LLC.

The yield of 2-year notes already in circulation was 0.21 percent late Tuesday, unchanged from late Monday.

Demand for Treasury securities has risen as the sluggish economy, falling stock prices and fears about Europe's debt crisis made riskier bets less attractive. Bond yields fall when their prices rise.

The Treasury Department has scheduled two more debt auctions this week. It plans to sell $35 billion in five-year notes on Wednesday and $29 billion in seven-year notes on Thursday. Tuesday's auction was for $35 billion in two-year notes.

The Federal Reserve's decision to keep interest rates near zero until mid-2013 effectively locked in low yields for Treasurys that mature in the next two years.

Demand for longer-maturity Treasurys diminished as investors put money back into stocks. The Dow Jones industrial average jumped 322 points Tuesday, its biggest gain since Aug. 11.

In late trading, the price of the 10-year Treasury note fell 25 cents for every $100 invested. That raised the yield to 2.15 percent from 2.10 percent late Monday.

The 30-year Treasury bond fell $1.38 for every $100 invested. Its yield rose to 3.49 percent from 3.42 percent late Monday.

The yield on the three-month bill fell to 0.01 percent 0.02 percent late Monday. Its discount wasn't available.