Treasury's 7-year auction fetches record low yield

AP News
Posted: Jan 26, 2012 4:27 PM
Treasury's 7-year auction fetches record low yield

The U.S. government is paying record low interest rates to fund its borrowing needs.

On Thursday, U.S. Treasury paid its lowest yield ever on a seven-year note auction. The government raised $29 billion at the auction with a yield of 1.359 percent. There were $2.73 worth of bids for each dollar of debt sold. That was lower than the $2.87 average of the last four auctions.

Even though demand was tepid, the government was able to sell debt at the lower yield because of the Federal Reserve's commitment to keeping interest rates near zero until 2014. The Fed said Wednesday it is keeping rates low to help a weak but slowly growing economy.

Treasury raised $99 billion in three auctions this week. On Wednesday it sold $35 billion of five-year notes, which also fetched a low yield of 0.89 percent, well below the average of 1.54 percent over the past year.

On Thursday, the benchmark 10-year Treasury note rose 59.3 cents for every $100 invested. The higher price pushed its yield down to 1.93 percent from 1.99 percent late Wednesday.

The price of the 30-year bond rose $1.12 sending its yield to 3.09, down from 3.15 percent.

In the market for short-term bills, the 3-month T-bill yielded a 0.05 percent.