Thursday, November 11, 2004

The big $51bn debt sale this week by the US Treasury is now over. $22bn in 3-year notes was sold on Monday, $15bn in 5-year notes on Tuesday, and $14bn in 10-year notes yesterday. How did things turn out? Did private capital markets gobble up these attractive little beauties, or did Uncle Sam have to go begging once again to the land of the rising sun?

Demand looked pretty robust for Monday's and Tuesday's sales.
The Treasury auctioned $22 billion in three-year notes yesterday and $15 billion of five-year notes today. Demand at both auctions increased, based on the amount of bids received versus the amount of debt sold.

The five-year notes were sold at a 3.51 percent yield, and investors bid for 2.90 times the amount of available securities, compared with 2.32 in October. So-called indirect bidders, a group that includes foreign central banks, bought 44.8 percent of the notes, up from 39.2 percent in the previous auctions.

``It was a good auction,'' said Paul Calvetti, head of U.S. Treasury trading at Barclays Capital Inc. in New York. The firm is also a primary dealer, which are obligated to bid at the auctions. ``It seems foreign central banks are still buying Treasuries.''
This follows the Monday sale in which investors bid for 2.24 times the amount of available securities, compared with 2.02 in August, and indirect bidders bought 53.6% of the debt, up from 36.5%.

This enthusiasm didn't carry over into Wednesday's sale, however. From AFX News Limited (thank you LexisNexis!),
Wednesday also brought the week's final Treasury auction, which involved the sale of $14 billion in 10-year notes at a 4.28 percent yield. The bidding was for 2.05 times the available notes, off from 2.12 at the prior sale in September. Indirect bidders, namely foreign central banks, bought 33.9 percent of the securities.
So, let's sum up. Of the $51bn in debt floated this week, indirect bidders (mostly foreign central banks) bought $23.3bn, or 46%. That's a pretty big presence no matter how you slice it.


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