Three-year Treasury Notes Near Record Low Yields

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The U.S. Treasury today auctioned $32 billion in 3-year notes at a yield of 0.346%, slightly higher than last month's auction but still near record lows. The bid-to-cover ratio reached 3.96, well above the 3.63 average of the last four sales.

The strong demand and low yields also pushed 10-year notes down by 4 basis points, to 1.71%, indicating that today's auction held down yields in the broader market.

Treasurys were stronger today following the revised International Monetary Fund (IMF) report on global growth. Calling the risk of a sharper decline in growth "alarmingly high," the IMF singled out the U.S. as the best house in a bad neighborhood. The fund forecast that U.S. GDP would grow 2.2% in 2012 and 2.1% in 2013. Nothing to be proud of in the abstract, but compared with other developed economies, the U.S. shines.

Today's low yields on 3-year notes underscores the continued weakness in the global economy and not any widespread enthusiasm about the U.S. economy.

Paul Ausick

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