U.S. Treasury Two-Year Note Yields Rise to 1.348% at Auction

(Bloomberg) -- The U.S. Treasury Department sold $26 billion of two-year notes at a yield of 1.348 percent, the highest since the Oct. 2008 auction.

The bid/cover ratio, which gauges demand by comparing the number of bids to the amount of securities sold, rose to 3.03 from 2.9 at the last two-year note sale, indicating stronger demand. The bid/cover ratio was the highest since 3.15 at the Nov. 2015 auction.

At the past six auctions of two-year notes, bids were received for 2.84 times the amount of notes being sold, on average.

Before the sale the notes yielded 1.345 percent to 1.350 percent.

The yield on the two-year notes sold today was the highest since 1.6 percent at the Nov. 2008 auction. At the May auction, the notes yielded 1.316 percent.

In financial market trading after the auction, the benchmark 10-year note yielded 2.15 percent. In market trading, the two-year note yielded 1.34 percent.

Auction Details

At the monthly auction, 14.88 percent of the bids were allotted at the high yield of 1.348 percent. The low yield submitted was 1.188 percent, the median yield was 1.3 percent, and the coupon rate was 1.25 percent. The price was 99.807259.

Tenders totaled $78,804,639,300 and the Treasury accepted $26,000,079,300 of the bids. Competitive bids awarded totaled $25,723,844,900. Non-competitive bids awarded -- including those sold directly to individual investors -- totaled $176,234,400.

Indirect bidders, a group that includes foreign central bank, bought 56.6 percent of the amount sold, compared with 57.2 percent in the prior auction. Primary dealers bought 25 percent, compared with 30.4 percent in the previous sale. Direct bidders purchased 18.3 percent.

For its own accounts, the Federal Reserve bid and was awarded $3,160,424,300.

The two-year notes will be issued June 30, settle June 30, and mature June 30, 2019. The CUSIP number on the bills is 912828XV7.

The minimum amount for Strips was $100. Strips stands for Separate Trading of Registered Interest and Principal of Securities. Coupons are separated from a note or bond and become a security. The remaining face value bond becomes another security that is known as a zero-coupon bond.

To contact the reporter on this story: Chris Middleton in Washington at cmiddleton2@bloomberg.net.

To contact the editors responsible for this story: Alex Tanzi at atanzi@bloomberg.net, Kristy Scheuble