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Treasury prices rally amid strong auction demand

Treasury prices rally amid strong auction demand

Treasury prices strengthened Tuesday, pushing yields lower, after another strong auction.
Investors again welcomed new debt into the market, snapping up $44 billion in two-year notes.
The bid-to-cover ratio, a measure of demand, was 3.63, much higher than 3.23 at an auction in September or the 2.68 in August for notes with a similar maturity.
The two-year note rose 5/32 to 100 3/32, while its yield fell to 0.95 percent from 1.04 percent late Monday.
Graham Allen, a senior portfolio manager of the Touchstone Core Plus Fixed Income Fund, said: "For some time, the dilemma has been, can the market absorb supply? So far we're seeing that it can."
Direct bidders, a measure of demand from U.S. banks, totaled 26 percent in Tuesday's auction, compared with nearly 12 percent during September's auction for two-year notes.
Banks can take customer deposits and generate a solid return by investing in longer term Treasurys which are yielding much higher returns than the nearly 0 percent deposits are accumulating right now, Allen said.
Allen said Tuesday's results bode well for the remaining auctions this week. The government will continue with its run of auctions Wednesday and Thursday, when it sells $41 billion in five-year notes and $31 billion in seven-year notes.
In other trading, the benchmark 10-year Treasury rose 19/32 to 101 6/32, pushing its yield down to 3.48 percent from 3.56 percent.
The 30-year bond rose 25/32 to 103 1/32. Its yield fell to 4.32 percent from 4.37 percent.
The yield on the three-month T-bill rose to 0.08 percent from 0.06 percent.
The cost of borrowing between banks was unchanged. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ remained steady at 0.28063 percent.


Updated : 2020-11-30 16:12 GMT+08:00