Investors looked to the safety of short-term treasuries Monday afternoon as prospects for upcoming earnings reports from the banking sector remained dim. Auctions for the 3 and 6-month bills from the U.S. government saw considerable demand as a mix of profit taking, earnings anxiety and a lack of significant economic reports has driven some traders out of riskier investments such as stocks.
As the week progresses, traders will focus on earnings figures from some of the largest financial institutions in the U.S., with results from Citigroup (C), JPMorgan Chase (JPM) and Goldman Sachs (GS) due to be released. Earnings from the banking giants will be closely watched as traders look for indications of stability in the volatile financial sector.
Ahead of the earnings news, the Treasury Department has directed General Motors Corp. (GM) toward a bankruptcy filing by a June 1st deadline, prompting some investors to weather the storm in the relative safety of government backed bonds.
Earlier today, the Treasury Department completed its auction of $28.0 billion worth of 3-month bills, drawing a high yield of 0.180 percent. Meanwhile the auction attracted strong demand, with the bid-to-cover ratio coming in at a level of 3.39. The security is scheduled to mature July 16th, 2009.
Despite the government ramping up offerings over the past three months, the short-term security has enjoyed substantial demand, posting a bid-to-cover ratio of at least 3.0 for the eighth auction in a row.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Last week, the government sold $30.0 billion worth of 3-months bills, with the sale drawing a yield of 0.200 percent. The auction posted a bid-to-cover ratio of 3.43.
Earlier this afternoon, the Treasury Department sold $27.0 billion worth of 6-month bills, with the auction drawing a high-yield of 0.370 percent and a bid-to-over ratio of 3.73. The bond is set to mature October 15th, 2009.
The previous auction for comparable securities took place early last week, when the government sold $28.0 billion worth of 6-month bills. The auction drew a yield of 0.400 percent, while the bid-to-cover ratio came in at a level of 3.33.
This morning, the government announced details of a weekly short-term security auction scheduled to take place Tuesday at 1:00 p.m. ET. The sale will be for $22.0 billion worth of 4-week bills set to mature May 14th, 2009.
The previous sale of the bills took place early last week, when $28.0 billion worth of the securities were sold. The auction drew a high yield of 0.160 and attracted strong demand, with the bid-to-cover ratio coming in at 3.41.
Meanwhile, the New York Federal Reserve continued its treasury buyback program Monday, part of its ongoing efforts to combat the effects of the recession by injecting capital into the economy.
The New York Fed purchased approximately $7.37 billion worth of securities with maturity dates ranging from March of 2011 to April of 2012.
The day's buyback saw strong interest, with dealers submitting a total of $26.64 billion in treasuries for the purchase.
Late last week, the Fed purchased approximately $2.97 billion worth of securities with maturity dates ranging from April of 2010 to February of 2011. The buyback saw strong interest, with dealers submitting $31.29 billion in treasuries for the purchase.
In the bond markets, treasuries are seeing considerable strength on the day, driving the yield on the benchmark ten-year note down 6.8 basis points to 2.858 percent.
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