February 21, 2018 / 5:35 PM / 10 months ago

Treasury sells $15 bln two-year floating rate notes amid supply deluge

NEW YORK, Feb 21 (Reuters) - The U.S. Treasury Department sold $15 billion of two-year floating rate notes on Wednesday, part of a bumper week of sales as the government ramps up issuance to help fund President Donald Trump’s major tax overhaul and a two-year budget deal.

The 2.75 bid-to-cover ratio was the lowest on record since the issue was introduced in January 2014, according to Tom Simons, senior money market economist at Jefferies LLC in New York. The ratio indicates the demand for a Treasury offering relative to the number of investor bids.

This week’s issuance of $258 billion is the second-largest amount ever over a three-day period, and is $1 billion short of the all-time high set in August 2010.

The federal debt load is expected to swell by as much as $1.5 trillion because of the U.S. tax overhaul signed into law in December, while the budget agreement would increase government spending by almost $300 billion over the next two years.

Indirect bidders took 27 percent of the offer, their smallest takedown since January 2017, according to Simons. Direct bidders took a record high of 14 percent and 58.9 percent was taken by dealers, well above the average rate.

The Treasury will also auction $35 billion of five-year notes later on Wednesday at 1:00 p.m. (1800 GMT).

Expectations the Federal Reserve may raise interest rates as many as four times in 2018 had helped propel the two-year Treasury yield to a nine-year high of 2.282 percent in overnight trading. (Reporting by Kate Duguid; Editing by Megan Davies and Meredith Mazzilli)

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