* Bid-to-cover ratio at auction lowest since September 2009
* Indirect five-year debt purchases highest since January
* Direct purchases at auction lowest since November 2009
NEW YORK, June 26 The U.S. Treasury Department
on Wednesday sold $35 billion worth of new five-year debt at the
highest yield in almost two years as investors held back due to
worries about less Federal Reserve stimulus and quarter-end
Treasury yields have risen sharply since early May, reaching
22-month highs on Monday as investors dumped bonds after the
Federal Reserve signaled it might trim its $85 billion monthly
bond purchases later this year if the economy improves further.
The reluctance to buy Treasuries in this bearish climate was
compounded by Wall Street firms that typically want to minimize
their balance sheets and their inventories of bonds, stocks and
other securities before the end of the quarter, analysts said.
The latest five-year auction followed a lightly bid two-year
note sale on Tuesday, raising concerns about demand for the $29
billion in seven-year debt supply for sale on Thursday.
This five-year issue fetched a yield of 1.484
percent, the highest since July 2011 and half a basis point
higher than traders had expected.
Overall demand for the supply was below average. The
bid-to-cover ratio or the amount of bids versus the amount of
debt offered, came in at 2.45, the lowest since September 2009.
Large fund companies, smaller bond dealers and other direct
bidders bought 3.56 percent of the latest five-year offering,
their smallest share since November 2009.
On the other hand, investors, foreign central banks and
other indirect bidders who submitted their buying orders through
primary dealers bought 52.99 percent at the auction, their
biggest share since January 2010.
Primary dealers, or the 21 Wall Street firms who do business
directly with the U.S. central bank, bought 43.45 percent of the
latest five-year offering, their biggest share in four months,
according to Treasury data.