Indiana Grain Company, LLC

Posted: 08/26/09

By: tomgrisafi

U.S. Treasurys traded little changed Wednesday, holding steady with the help of decent demand at the government's latest debt sale, which should assuage some worries over the country's burgeoning debt.

Treasury's $39 billion auction of five-year notes attracted strong demand overall, with the bid-to-cover ratio coming in at 2.51. That was well above the average ratio of 2.17 seen over the last 12 months.

Foreign and institutional investors took 56 percent of the issue, based on the indirect bidding category, which was above average for the last year, but below June's 63 percent.

The main negative of the sale was that yields came in above market expectations, a so-called "tail," based on trade in the when-issued market just before the auction, but the difference was not large.

"We got a strong indirect bid but there was a modest tail of 1.4 basis points versus the when-issued (market). It's in line with what we saw in yesterday's auction," said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Conn.

"We can't see in the data to say definitively that there is a pickup to foreign bidding, but it's not that much of a leap (to suggest it). This is good in the financing of the federal deficit and will keep interest rates contained through the summer."

The benchmark 10-year Treasury note was last trading unchanged on the day yielding 3.44 percent. This was a slight improvement from its losses of about 4/32 just before the auction.

Source: Reuters, CNBC

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