Strong demand greets US Treasury’s 5-yr debt sale

By Burton Frierson

NEW YORK, April 28 (BestGrowthStock) – The U.S. government sold $42
billion of five-year debt on Wednesday in an auction that drew
strong demand, overcoming market uncertainty as investors
awaited a Federal Reserve policy statement.

Yields at the auction were close to expectations based on
trade in the when-issued market, indicating investors were not
aggressive in demanding a premium to take down the bonds.

The auction was the third of four bond sales in this week’s
record offering of $129 billion worth of coupon-paying
securities.

It came amid worries that uncertainty could temper demand
ahead of the U.S. central bank’s statement around 2:15 p.m. and
after two days of volatility brought on by the fiscal crisis in
troubled euro zone countries.

“An excellent auction, considering,” said William
O’Donnell, head of U.S. Treasury strategy at RBS Securities in
Stamford, Connecticut.

Overall demand was solid based on the bid-to-cover ratio of
2.75 times the amount on offer, which was above the long-run
average of 2.33.

Foreign central banks and large institutional investors
showed reasonable demand, based on the indirect bidder
category, which took about 49 percent of the sale.

That was right on the average of auctions since June 2009,
which has become a benchmark for comparisons because of changes
in calculations since then.

The direct bidding category accounted for an astounding 14
percent of the sale, well above its average of about 7 percent
since June.

This category has been growing for much of the market in
recent months and in some cases appears to be offsetting
declines recorded in indirect bidding.

Financial markets have been watching bond auctions closely,
given a burgeoning U.S. budget deficit brought on by a costly
financial sector bailout and efforts to stimulate the economy.

While analysts say the jump in debt could come back to
haunt the government, the Treasury last week signaled its bond
issuance may have peaked, suggesting the worst may be over.

Investment Basics

(Editing by Leslie Adler)

Strong demand greets US Treasury’s 5-yr debt sale