Three-Year Note Auction Gets Weak Reception

Wall Street’s dealers swept up their biggest share of new 3-year notes in three years, as investors refused to bid aggressively for the $32 billion issuance.

Ben Bernanke
Getty Images
Ben Bernanke

The 1 p.m. EST auction saw a near record low yield of 0.347 percent, and came shortly on the heels of more reassurances from FedChairman Ben Bernanke that interest rates would continue to be super low for several more years.

Bernanke was testifying before the Senate budget committee. He also reaffirmed that the Fed could carry out another quantitative easingprogram if necessary.

Dealers took 63.8 percent of the 3-year auction, compared to an average of about 50 percent. That is the highest level since January 2009. Indirect bidders, which include foreign central took 27.7 percent, versus their auction average 39.6 percent. That was the lowest level since February 2011.

“They just didn’t bid aggressively, which meant they weren’t bidding through the market for it,” said Ian Lyngen, senior Treasury strategist at CRT Capital.

Lyngen said it does not mean Wednesday’s $24 billion 10-year auction will not be well bid, particularly as many investors are still concerned about the European debt crisis and view the U.S notes as a safe haven. .

Bernanke, in his testimony, reassured Congress that the Fed is monitoring Europe closely and will take whatever steps it can to protect the U.S. financial system and economy.

”It could mean people are saving their ammunition to go further out the curve,” Lyngen said.

Follow Patti Domm on Twitter @pattidomm

Questions? Comments? Email us at