Foreign demand boosts U.S. 7-year Treasury sale

NEW YORK Nov 25 (Reuters) - Robust demand from foreign central banks fired up Wednesday's record $32 billion auction, rounding out this week's $118 billion government debt supply.

Overseas central banks of export-reliant countries have bid heavily for U.S. Treasuries in an effort to stem the rise of their currencies against the dollar, analysts said.

Large money managers also added zest to the seven-year auction, as they scrambled to put cash into higher-yielding, longer-dated securities, they added.

"There continues to be a lot of money washing around in all markets," said Mark Pawlak, market strategist with Keefe Bruyette & Woods in New York.

The intense demand soothed some concerns the U.S. government will struggle to finance its burgeoning deficit.

Indirect bidders which include foreign central banks and big institutional investors took 65 percent of the seven-year notes offered, according to the U.S. Treasury. [ID:nTAR000560]

The latest figure is above the 62 percent average on the prior five sales after the government changed the way indirect bids are recorded at auctions.

Given the robust indirect demand, the auction's bid-to-cover ratio, a barometer of overall demand, was 2.76 compared with October's 2.65 and its recent average of 2.73.

The new seven-year notes due Nov 2016 cleared at a high yield of 2.835 percent. This was below the 2.865 percent US7YTWI=TWEB in the "when-issued" market shortly before the Treasury announced the seven-year auction result.

In the open market, the actively traded seven-year notes US7YT=TWEB were yielding 2.835 percent.

This week's Treasury supply came in advance of an estimated $21 billion in publicly-held Treasuries maturing on Monday. For more, see [ID:nWEQ003603]

(Reporting by Richard Leong; Editing by Andrew Hay) ((richard.leong@thomsonreuters.com ; +1 646 223 6313; Reuters Messaging: richard.leong.reuters.com@reuters.net ))