Rates on US Treasury bills rise at weekly auction

Rates on US Treasury bills rise at weekly auction

Regulations aimed at curbing risk in the financial system are limiting banks' ability to trade on their own accounts, reducing the allure of buying at auctions.

Demand at US Treasury auctions fell this year to the lowest since 2009 as Wall Street dealers and central banks pulled back.

The Treasury concluded its sale of $90 billion of notes with a $29 billion auction of seven-year notes, which drew weak demand due to some investors already closing books for the year.

"It was a poor auction - the bidding was not as aggressive", said Thomas Roth, senior Treasury trader in NY at Mitsubishi UFJ Securities USA Inc.

Investors submitted bids for 2.8 times the nearly $2 trillion of notes and bonds that the United States has offered, data compiled by Bloomberg shows.

"It (Other OTC: ITGL - news) was a pretty soft auction with little saving grace and it was a sour note to end the year on and it's largely because of the timing", said Aaron Kohli, an interest rate strategist at BMO Capital Markets in NY. Yields on Egypt's zero-coupon 1.5 year, and three-year treasury bonds rose marginally to 11.844, and 12.521 percent, respectively, at the previous auction on December 14. The yield on the benchmark 10-year Treasury note was 2.240% Monday compared with 2.241% Thursday.

But what bears didn't anticipate this year: a sharp decline in crude-oil prices, a stock-market swoon in China that heightened worries over the slowdown in the world's second-largest economy and its broad ramifications in the world, as well as China's shocking move in August to devaluate its currency.

The 10-year yield, a foundation of global finance, closed at 2.173% at the end of 2014.

The two-year note was last up 2/32 in price to yield 1.047 percent, down from 1.079 percent on Wednesday.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

The drop is an early warning sign of a broader drop in demand for Treasuries, said David Keeble, the New York-based head of fixed-income strategy at Credit Agricole.

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