NEW YORK: The US Treasury's $30 billion sale of four-week notes on Tuesday drew solid demand with nearly five times as many bids offered as accepted.
The ratio of bids offered over those accepted was 4.71, just below last week's ratio of 4.75, with 21.07 percent of the bids accepted at the high rate of 0.080 percent.
The indirect takedown of 30.8 percent was a bit lower than last week's, but well above the recent averages, said Thomas Simons, vice president and money market economist at Jefferies and Co. The indirect takedown of 30.8 pecent is a bit lower than last week's takedown, but well above the recent averages.
Dealers captured just 56.9 percent of the issue, their lowest portion since March 6. Direct bidders took 12.2 percent, their lowest takedown since March 13.
Simons said the weekly settlements of bill auctions continue to generate pay downs.
"We do not think that the reductions in auction supply are finished despite the pause this week," he said.
The auctions occurred in the context of worries about slowing US growth and worry about whether Europe's fiscal problems could plague its banks.
KEY EURO ZONE BANK-TO-BANK LENDING RATES HIT LOWS
Yet overseas, key euro zone bank-to-bank lending rates hit new 21-month lows on Tuesday, pulled down by the torrent of cash the European Central Bank has flooded financial markets with since late last year.
The ECB, which left official euro zone interest rates at 1.0 percent last week (click ), has poured over one trillion euros of ultra-cheap, 3-year funding into the banking system since the end of December, a move which has sparked a 45 percent drop in the prices at which banks lend to each other.
Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending, continued to fall on Tuesday, hitting 0.764 percent, the lowest level since June 2010.
Six-month rates fell to 1.061 percent from 1.064 percent and 12-month rates dropped to 1.398
percent from 1.402 percent.
Shorter term rates followed suit. The one-week rate , which continue to bump around all-time lows, inched down to 0.316 percent. Overnight rates eased to 0.352 percent from 0.353 percent.
Dollar-priced bank-to-bank Euribor lending rates increased. Three-month rates rose to 0.971 percent from 0.961 percent, while overnight rates climbed to 0.329 percent from 0.326 percent.
Despite the sharp fall in interbank rates over the last few months, the benchmark euro-priced three-month rate remains some way above the euro-era low of 0.634 percent hit in early 2010.
With the ECB expected keep limit-free liquidity available and interest rates at their record low for the foreseeable future, further falls in Euribor rates are expected, but part of the reason for the higher rates is that lending markets remain impaired.
High excess liquidity in the banking system has led to high use of the ECB's overnight deposit facility, with banks last parking 785 billion euros there. In normal times the amounts are minimal.
The 0.25 percent the ECB offers banks for overnight deposits continues to act as a floor for money market rates as banks know they can get that level of interest no matter what.
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