Treasury prices dip after tepid 7-year auction

AP News
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Posted: Dec 21, 2011 4:29 PM
Treasury prices dip after tepid 7-year auction

U.S. Treasury prices fell Wednesday after an auction of $29 billion seven-year notes failed to generate strong demand from investors.

The government had to pay a yield of 1.43 percent on the notes, sharply higher than the 1.38 percent yield the seven-year note was trading at prior to the sale.

Demand for the notes was 2.68 times the offering, compared to 3.2 times at an auction last month and the average of 2.88 in the last four auctions. The one bright spot was that foreign bidders made up 42 percent of the buying, the highest amount in the last four months.

The price of the 10-year Treasury note fell 37.5 cents per $100 invested Wednesday afternoon, increasing its yield to 1.97 percent from 1.93 percent late Tuesday.

In recent weeks, U.S. Treasurys have attracted buyers seeking refuge from turbulence in other markets brought on by the latest worries about Europe's credit crisis. European banks have been asked to bulk up on dollar-denominated assets at a time when sovereign bonds issued by European countries have been losing value.

On Wednesday, some of that buying abated. The European Central Bank disclosed that it allowed hundreds of regional banks take out a record $639 billion in loans. It was the largest ECB infusion of credit into the banking system in the 13-year history of the shared euro currency.

The price of the 30-year Treasury bond fell $1.43 per $100 invested, pushing its yield up to 3 percent from 2.93 percent late Tuesday.

The yield on the two-year Treasury note rose to 0.28 percent from 0.27 percent late Tuesday.

The yield on the three-month Treasury bill was unchanged at zero. Its discount wasn't available.