The Treasury Department completed an auction of the benchmark 10-year note early Thursday afternoon, continuing its streak of record bond sales.
In recent months, the government has pumped up its bond offerings in order to raise funds for spending measures, meant to ease the grip of the recession on the U.S. economy. Subsequently, the average offering size for the 10-year note has seen an increase of approximately $4 billion since last year.
The government sold $18.0 billion worth of the security in Thursday's auction, drawing a high yield of 2.950 percent. The sale attracted a moderately strong demand, with the bid-to-cover ratio coming in at a level of 2.49.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Traders traditionally pay close attention to the auction of the ten-year note, as it is known as a benchmark security in the bond market. Investors will compare the results of the auction to the outcome of the ten-year TIPS sale held earlier in the week, as the spread between the securities is likely to give an indication of near-term inflation.
The government sold $6.0 billion worth of the ten-year inflation protected note, known as TIPS on Tuesday. The auction drew a high-yield of 1.589 percent, while posting modest demand, with the bid-to-cover ratio coming in at 2.25.
The results for Thursday's 10-year auction showed increased demand compared to last month, when the Treasury also sold $18.0 billion worth of the securities. The auction in March drew a high yield of 3.681 percent, with the bid-to-cover ratio of 2.14.
In addition to the 10-year sale, the Treasury Department revealed details for its weekly 3 and 6-month bill auctions.
The auction of 3-month bills is scheduled to take place next Monday at 1 PM ET. The government plans to sell $28.0 billion worth of the short-term securities that will mature July 16th, 2009.
The previous auction was for $30.0 billion worth of 3-month bills and drew a high yield of 0.200 percent. The sale saw stronger than usual demand, with the bid-to-cover ratio coming in at a level of 3.43.
The Treasury also announced Thursday that its plans to auction $27.0 billion worth of 6-month securities maturing October 15th, 2009. The sale is scheduled to take place at the same time as the 3-month offering.
In the previous auction, the government sold $28.0 billion worth of 6-month bills, with the auction drawing a high-yield of 0.400 percent and a bid-to-over ratio of 3.33.
While the Treasury Department continues to sell large amounts of treasury bills, the Federal Reserve has begun to buy back some of the securities.
In addition to the treasury repurchase, the Fed will also buy an additional $750 billion in mortgage-backed securities and $100 billion in agency debt. The move is part of a quantitative easing plan aimed to thaw credit markets through capital injection.
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