MONEY MARKETS-U.S. bill sales get demand from buyside, dealers

(Reuters plans to discontinue New York money market reports asof Oct. 15 and fold coverage into daily U.S. Treasury reports.Significant money market developments will be reportedseparately. Please e-mail comments [e-mail])

By Ellen Freilich

NEW YORK, Oct 9 (Reuters) - Weekly U.S. sales of short-termU.S. Treasury debt drew solid demand on Tuesday with dealerstaking the largest portions of the issues and yields on theissue remaining low, anchored by the Federal Reserve's very lowovernight rates.

At its September policy meeting, the Fed said it would keepthe target range for its federal funds rate at zero to 1/4percent and said it currently anticipated "that exceptionallylow levels for the federal funds rate are likely to be warrantedat least through mid 2015."

The Treasury sold $32 billion in three-month bills at a highrate of 0.100 percent, awarding 72.35 percent of the bids at thehigh. The value of bids received over those accepted, known asthe bid-cover ratio, was 4.55.

The Treasury also sold $28 billion in six-month bills at ahigh rate of 0.145 percent, awarding 9.31 percent of the bids atthe high. The bid-cover ratio was 4.68.

The three-month bill auction stopped one basis point shortof the when-issued bid, the first auction to do so since April2, said Thomas Simons, vice president and money market economistat Jefferies & Co in New York.

The appeal of the bill may have been its maturity date, Jan.10, 2013, which bridges year-end, he said. The 4.55 bid coverratio was "right in line with the recent average," he said.Meanwhile, dealers got just 58.9 percent of the sale, the leastsince April 2.

The six-month bill auction stopped on the 11:30 a.m. biddingdeadline yield of 14.5 basis points, making it the highestyielding six-month bill auction since Aug. 20, Simons said.

The 4.68 bid cover ratio for the six-month bill sale wasslightly below the recent average, he said, and dealers got 70.4percent of the sale, their largest share since Sept. 10.

"Apparently the buyside focused their attention on thethree-month auction this week," Simons said.

Still, with overnight general collateral repo rates offeringyields in the mid-20 basis points, the buyside is unlikely todisplay a "huge interest" in bills and auctions "will continueto be dealer-dominated," he said.

"The maturity dates (bridging year-end) brought out someincreased interest from the buyside this week, but that bid willnot be consistent going forward," he said.

A sale of $40 billion in four-week bills is planned forWednesday, Oct. 10, to be settled on Thursday, Oct. 11.

(Editing by James Dalgleish)

(([e-mail] 646-223-6309))

Keywords: MARKETS MONEY/