Magazine article American Banker

Treasuries Slide as Investors Stand Aside; Decline Attributed to Large Supply and to Fear of Rising Interest Rates

Magazine article American Banker

Treasuries Slide as Investors Stand Aside; Decline Attributed to Large Supply and to Fear of Rising Interest Rates

Article excerpt

NEW YORK -- The U.S. government securities market continued on a downward path last week, setting new lows and coming closer to eclipsing the yield levels that prevailed before the start of the bull market in August 1982.

Prices of coupon securities fell as much as 2-3/4 points as the Treasury's $16.50 billion quarterly refunding of 3-year, 10-year, and 30-year securities proved to be too much for the dealer community to handle. The problem, traders and analysts said, remains the same: little investor interest and an ever-growing supply of merchandise to finance the federal budget deficit.

With approximately $9.3 billion of publicly held coupon issues maturing Tuesday, the refunding adds a net principal of about $7.2 billion in notes and bonds to the market.

That supply and predictions of higher interest rates through the end of the year by most economists frightened investors away from the auctions for the most part.

"Interest in the auctions was minimal from investors," commented Maria Ramirez, a senior vice president with A.G. Becker Paribas Inc. Speaking late Thursday, after the market scrutinized the bidding results of the refunding finale of $4.75 billion of 30-year bonds, she continued, "And this turned out to be the case in particular with the bond auction."

Even the first part of the financing package, the sale of $6.5 billion three-year notes, a maturity that generally meets good demand from banks, saw little retail participation, dealers said. …

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