U.S. Two-Year Treasury Notes Fall After $24 Billion Government Auction

[bemildred]

Feb. 24 (Bloomberg) -- U.S. Treasury notes fell after the government auctioned $24 billion of two-year securities at a higher-than-forecast yield, a sign of weak demand.

Expectations the Federal Reserve will keep raising its benchmark interest rate deterred buyers, traders said. The notes were sold to yield 3.498 percent, compared with the 3.488 percent average forecast of five bond-trading firms surveyed by Bloomberg and the highest for a two-year note since March 2002.

``Nobody expected the yield to come out at 3.498 percent,'' said Raymond Remy, head of fixed-income at Daiwa Securities America Inc. in New York, who called it a ``sloppy'' auction. ``I had expected a yield of 3.485 percent. The two-year note has backed up recently, but evidently it was not cheap enough.''

The two-year note auctioned last month, a 3 1/8 percent security maturing in January 2007, fell 1/16, or 63 cents per $1,000 face amount, to 99 11/32 at 2:25 p.m. in New York, according to bond broker Cantor Fitzgerald LP. The yield increased 3 basis points to 3.47 percent, the highest since April 2002, and is up from 3.07 percent at the start of the year. A basis point is 0.01 percentage point.


Bloomberg

[nadinbrzezinski]

1. ok we are starting to see tremors in the economy

[Massacure]

2. So two years from now, the government owes back $25.7 billion dollars.

Weeee! So glad we lost $1.7 billion dollars.

[fedsron2us]

3. This is a symptom of dollar weakness

Foreign investors are starting to realise that holding their investments in securities denominated in the US currency is becoming risky. They want higher returns to offset some of the danger of dollar holdings. Since the US needs this flow of money to continue just to keep the government and economy turning over then interest rates are sure to be going higher.