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US Treasury begins bond auction


by Brian Turner
August 8, 2005
US Treasury begins bond auction

The United States Treasury auctioned $18 billion in 3-year paper on Monday in the first of its quarterly refunding sales.

Bids were at 2.31 times the supply, but analysts believe that this was primarily due to a reduction in the size of the auction.

Five-year bonds will be auctioned on Wednesday and 10-year bonds will go on Thursday. At late trade on Monday, 3-year yields were up by 5.2 basis points to 4.216 percent, while 10-year bonds gained 3 basis points to yield 4.422 percent, a new four-month high.

Yields on short dated bonds were helped by the expectation that the Federal Reserve will raise interest rates to 3.5 percent this week.

In the eurozone, investor concerns about higher crude oil prices produced mixed results in the bond markets. The 10-year Bund lost 1.3 basis points to yield 3.366 percent, while the 2-year Schatz was up 0.6 basis points to yield 2.329 percent.

In the UK, prices were up and yields down in anticipation of the upcoming quarterly inflation report. The 2-year gilt was down 0.7 basis points to yield 4.227 percent, and the 10-year gilt fell 2.2 basis points to 4.393 percent.

Government bonds in Japan saw yields rise by 2.5 basis points on the 5-year bond to a yield of 1.405 percent after post office privatization was defeated in the upper house of parliament.



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