NEW YORK: A US Treasury auction of $21 billion of reopened 10-year Treasury notes on Wednesday had the weakest investor demand in nearly a year as investors turned to beaten down stocks and away from the lower-risk government debt.
The bid-to-cover ratio -- a gauge of demand -- was 2.86, which marked the lowest since November 2010.
The auction also brought a high yield of 2.271 percent, which was above where 10-year notes were trading in the when-issued market at the time of the sale, and a signal investors were unwilling to pay for the notes at market-level rates. The higher-than-expected yield in the auction is known as a "tail."
"The 10-year auction was weak with a 3.5 basis point (tail), the largest tail since December 2009," said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut."
The percentage of indirect bidders, a category which includes overseas central banks, was about 35 percent and the lowest since a 10-year note auction in February 2010.
The low indirect demand comes a day after the US Senate passed legislation designed to press China to let its currency rise in value.
China opposes the legislation, and analysts are always watching for any signs China might slow its purchases of US Treasuries in an expression of displeasure with the United States.
The weak demand in Wednesday's auction was not ascribed to any Chinese reluctance to buy however, as analysts said some signs Europe was moving to address its debt crisis were encouraging more of a "risk-on" investment attitude that was sapping Treasuries' safe-haven allure.
"It just may mean that people are a little more comfortable with risk than they were in the past week," said David Coard, head of fixed income sales and trading at Williams Capital in New York.
"There seems to be more comfort in the notion that the economy is not going to experience a double-dip. There's more confidence that the Europeans have the situation there under control and that's making people feel more comfortable with risk assets."
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