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Treasury Department auctions $25 billion of 3-year notes at a high yield of 1.066%

The U.S. Treasury Department on Tuesday sold $25 billion in three-year notes at a yield of 1.066 percent, matching the level set in September, Treasury data showed.

The yield level at the three-year note auction in September was the highest since April 2011.

The bid-to-cover ratio, an indicator of demand, was 3.24, higher than November but below the recent 6-month average.

The indirect bid was 42.2 percent, the largest since August 2011, and direct bid was 10.1 percent, the smallest since June 2013.

The 3-year note yield rose slightly to 1.043 percent from 1.038 percent before the auction.

The 10-year Treasury note yield gained to 2.213 percent.

The 30-year Treasury bond yield edged higher to 2.873 percent.

Symbol
Yield
 
Change
%Change
US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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Earlier on Tuesday, U.S. government bonds rallied and 30-year Treasury yields dropped to their lowest in two months as falling equity markets and oil prices increased demand for safe haven U.S. debt.

Oil prices fell to five-year lows, adding to worry about global economic growth, while Greek share and sovereign bond markets plunged after the government brought forward a presidential vote in a political gamble that heightened uncertainty over the country's transition out of its IMF/EU bailout.

China's official bond clearing house also rattled markets by tightening collateral rules. It excluded about 500 billion yuan ($81 billion) worth of corporate bonds from being used for bond repurchase agreements.

"There's a flight to quality bid that is overwhelming any of the economic fundamental data at the moment,'' said Ira Jersey, an interest rate strategist at Credit Suisse in New York.

The Treasury yield curve was at its flattest in six years on Monday as investors bet that the strong jobs report for November will keep the Federal Reserve on course to raising interest rates next year.

The Federal Reserve's vow to keep interest rates near zero for a "considerable time" will be in focus for any changes to the language when the U.S. central bank meets next week.

The Treasury will also sell $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday.