TREASURIES-Prices ease on 3-year auction disappointment

* Three-year note auction met with disappointing demand

* Fed at Sept policy meeting mulled eventual QE

* Two-year note yield hits fresh record low
(Adds strategist comment, updates prices)

By Chris Reese

NEW YORK, Oct 12 (BestGrowthStock) -U.S. Treasury debt prices were
steady to slightly lower in price on Tuesday after lackluster
demand in an auction of three-year notes spurred some worries
over the potential success of remaining debt auctions this
week.

Losses were limited however as minutes from the Federal
Reserve’s last policy meeting maintained the notion that the
central bank will go ahead with another program of quantitative
easing in the near future that many expect will include an
expansion of Treasury debt purchases.

The government sale of $32 billion of three-year notes
early in the afternoon brought a high yield that was above
market expectations, indicating investors were unwilling to pay
for the notes at the current historically low yields.

“A terrible showing on the demand side in the three-year
auction,” said Thomas di Galoma, head of fixed income rates and
trading at Guggenheim Securities in New York.

Three-year notes (US3YT=RR: ) were trading 2/32 lower in
price to yield 0.56 percent, up from 0.53 percent late on
Friday, while benchmark 10-year Treasury notes (US10YT=RR: ) were
5/32 lower to yield 2.41 percent from 2.40 percent.

The Treasury will auction $21 billion of reopened 10-year
Treasury notes on Wednesday and $13 billion of reopened 30-year
bonds (US30YT=RR: ) on Thursday.

The Fed’s release of minutes from its Sept. 21 Federal Open
Market Committee meeting did little to change expectations of
further quantitative easing from the central bank, which many
expect to be announced as soon as the early November policy
meeting.

The minutes outlined that in September Fed policy makers
felt further monetary easing could be appropriate before long,
and that among possible approaches the focus was on buying
Treasuries. For details see [ID:nWALCLE6OH].

“(Fed officials) noted that slow growth in and of itself is
enough to warrant asset purchases and in this context the data
since the meeting has done little to suggest anything other
than near-term quantitative easing — the increasingly
consensus view calls for a Nov. 3 announcement,” said Ian
Lyngen, senior government bond strategist at CRT Capital Group
in Stamford, Connecticut.

Most primary dealers think the Fed will announce its second
round of easing measures directly following the Nov. 3 meeting,
a Reuters poll found on Friday. [FED/R]

The increased speculation of more Fed asset purchases has
recently supported Treasury debt prices and pushed yields down
to historic lows.

Indeed, the two-year Treasury note’s (US2YT=RR: ) yield
dipped to a new record low of 0.34 percent on Tuesday. The
two-year note did pull back in price however to trade 1/32
lower with a yield 0.37 percent on Tuesday afternoon, from 0.36
percent late on Friday.
(Additional reporting by Emily Flitter; Editing by Diane
Craft)

TREASURIES-Prices ease on 3-year auction disappointment