Auction of 5-year notes draws record-low yield

AP News
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Posted: Aug 24, 2011 4:47 PM
Auction of 5-year notes draws record-low yield

The government sold five-year Treasury notes at a record low yield Wednesday. Yields on longer-dated Treasurys rose sharply after a large increase in orders for durable goods last month.

The five-year notes were priced to yield 1.029 percent, about the same as those bought on the open market. The results show that demand remains strong for short-term government debt. Bond yields rise as their prices fall.

Stronger economic news pushed yields of longer-dated notes and bonds higher and their prices lower. A 4 percent increase in orders for long-lasting manufactured goods decreased demand for longer-dated Treasurys, which are more sensitive to inflation. Stock prices rose for most of the day, decreasing demand for relatively low-risk investments. The Dow Jones industrial average closed up 144 points at 11,321.

The yield on the 10-year note rose to 2.29 percent in afternoon trading, from 2.15 percent late Tuesday. The price fell $1.22 for every $100 invested.

The yield on the 30-year bond rose to 3.65 percent from 3.49 percent. The price fell $3 for every $100 invested.

The yield on the 2-year note rose to 0.23 percent from 0.21 percent.

Wednesday's $35 billion auction was the second of three scheduled for this week. On Tuesday, the government sold $35 billion of two-year notes, also at record-low yields. It plans to sell $29 billion of seven-year notes Thursday.

The yield on the 3-month T-bill was 0.01 percent. Its discount wasn't available.