Wednesday, December 30, 2009

Treasuries Set for Worst Year Since 1978 as U.S. Steps Up Sales


Treasuries headed for the worst year since at least 1978 as the U.S. stepped up debt sales to help spur growth in an economy recovering from its deepest recession in six decades.

U.S. seven-year notes were little changed before today’s $32 billion sale of the securities, the last of three auctions this week totaling $118 billion. The Treasury sold a record- tying $42 billion of five-year securities yesterday and $44 billion in two-year notes on Dec. 28. U.S. government securities have fallen 3.6 percent this year, according to Bank of America Merrill Lynch indexes, the worst annual performance since at least 1978, when Merrill began collecting the data.

“It’s the last hoop the market has to jump through in 2009,” said James Collins, an interest-rate strategist in the futures group in Chicago at Citigroup Inc., one of 18 primary dealers obliged to participate in the Treasury’s auctions. “Yields have been trending higher. It’s been a response to increased supply.”

The yield on the benchmark 10-year note was little changed at 3.80 percent at 9:24 a.m. in New York, according to BGCantor Market Data. The yield has increased 1.58 percentage points this year. The 3.375 percent debt due in November 2019 fell 1/32, or 31 cents per $1,000 face amount, to 96 17/32. The yield on a seven-year note was little changed at 3.31 percent.

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