Hot sectors in a tepid recovery
The energy, finance, technology and healthcare industries are expected to be the hottest areas for dealmaking in 2010. Full Article | Full Coverage
Investors rush to record U.S. 2-year note auction
NEW YORK, Oct 27 (Reuters) - Traders, fund managers and international central banks snapped up a record offering of two-year Treasury notes on Tuesday, suggesting global appetite for U.S. government debt has not abated.
The heavy bidding for Treasuries for a second straight day surprised some traders. There has been increasing chatter that the Federal Reserve is looking to move away from its ultra-loose monetary policy as the U.S. economy shows signs it is emerging from recession.
Treasury data on the $44 billion auction showed overall bidding for this maturity was the highest in two years and second highest in the past 17 years, according to analysts.
The heavy demand led the new two-year notes to clear at a yield of 1.02 percent, about 2.5 basis points below their expected level. For details, see [ID:nTAR000414]
"It was a surprisingly strong," said Larry Milstein, head of agency and government trading at R.W. Pressprich & Co in New York. "There was some trepidation in buying Treasuries coming into the auctions."
The two-year auction is the second leg of this week's record $123 billion bond supply from the U.S. Treasury. This followed robust demand on Monday for $7 billion worth of five-year inflation-protected securities.
The U.S. government has borrowed heavily since last year to finance its stimulus package and various bailouts in a bid to help the economy, hammered by the housing and credit crises. In the last fiscal year, it took on more than $1.5 trillion in new debt.
The heavy buying, especially by foreign central banks, shown in the week's first two auctions should carry over to the $41 billion auction of five-year notes on Wednesday and $31 billion sale on Thursday, analysts said.
"We are seeing foreign central bank buying. We expect them to play in the five-years," said R.W. Pressprich's Milstein.
Banks have also been keen buyers of Treasuries as a way to make money as they have been reluctant lenders in the still weak economic climate, analysts said. (For a graphic of recent U.S. two-year note auction results, see here)
