Markets for Treasury Board wilts as waves Fed adieu

Traders react in the pit to the Options of Treasury 10 years of the Group of the SFC in Chicago, August 10, 2010.

Credit: Reuters/John GressBy Emily Flitter

NEW YORK | Thursday, July 7, 2011 5: 00 am EDT

NEW YORK (Reuters) - The Federal Reserve of $ 600 billion from the Treasury to purchase spree is over and the bond market is more nervous now that its largest bidder is cancelled.

Except for possible hiccups in August Congress if with the task to raise the legal limit of borrowing, the Government will go to issue 166 billion dollars in Treasury bonds and notes by primary dealers and months do not well where demand will be come from and at what price.

A possibility is investors like foreign central banks, insurance companies and fund managers, but their draught can be complicated; some of the Treasury yields are near its low. And for the first time since 2005, JPMorgan is reported, that there was no position of long in Treasury bills.

There where Europe Pompée sovereign debt problems once the application of the debt of U.S. refuge, news that the Portugal debt was downgraded to junk just woke the market this week. More brilliant economic data, and more recently the ADP employment report National, who has shown a jump surprise in jobs in the private sector in June, had more shine to these low-yield Treasury bills. Treasury bonds sold Thursday following the number of ADP and the strong June retail sales.

And the Congress still is struggling to raise the ceiling of the debt, with the last talks leaving a wide gulf between President Barack Obama and Republican lawmakers, as a potential defect deadline Aug 2 of Treasury draws near.

FAREWELL TO THE CERTAINTY OF THE PRICE

For the moment, leading dealers companies, banks and securities allowed to bid on behalf of clients in the auction of the Treasury Board, will be betting on a price without proof that they had to be able to sell the titles quickly on the secondary market, or the Federal Reserve.

"People are less willing to take on time without the certainty of three or four redemptions per week to support the market," said Rick Klingman, Director General of the Treasury Board negotiating to BNP Paribas in New York.

The duration is a measure of the risk of interest rates.

Which has already led to sales auction sloppier with borrowing higher for the high auction of Government gives correction to a higher note that available on the open market, a phenomenon called a "tail".

This happened two weeks ago, when three separate auctions "tail" in the worst week for sales of Government since March 2010.

Auctions of tail when bidders insist on lower prices for a given security or confusion about the application security causes bidders behave with caution.

The next test will be next Tuesday, when the Government sells 32 billions of dollars in the three-year notes.

"The auction have been unfolding with participants while knowing in advance that there would be a buyer in the post-auction in the secondary market," said Scott Sherman, strategist, interest rate Credit Switzerland in New York, one of the 20 primary dealers.

Sherman said it was particularly true in the notes of three years, the notes of five years and seven years.

"The Fed purchased immediately-tracks (in these deadlines) by volume, generally shortly after the building a somewhat important position and auction"he says. ".

"Sur-works" refers to bonds more recently issued to a given deadline.

"There may be a learning curve, where the auction on a first come, the triennial is sold at auction and people see what it looks like when there is less demand, then the next auction of three years is in August and you get a larger change in the call for tenders.

THE SET OF EQ

Second round of the Federal Reserve of the quantitative measures easing, which began in mid-November and ended June 30, has changed how major traders bought and sold the bonds, with - if temporary - stable way to earn profits of spreads.

Primary dealers followed hard the prices of the various titles along the yield curve, determine which were relatively expensive and which were cheap, place filling on securities in good markets and then sell the fed at a higher price.

Given that the Fed has kept dealers informed with a calendar purchase pre-specified, in which he registered securities groups, he had the intention to choose each day, dealers had much time to plan.

"Quickly (investors such as hedge funds) money wanted to play the game rich and cheap as well and play some volatility, but which is in part will go, said Christian Cooper, head of derivatives of dollar trading Jefferies & Co. in New York."

First round Fed's quantitative easing, which ended last March, was less than half of QE2 and traders did not intervene in these rigorous efforts to predict the FED's purchases first autour.

During the10, the Fed bought, between approximately $ 2 billion and 9 billion dollars in Treasury bills, each day, that it has entered the market. In a few weeks, he completed a transaction to purchase every day. In others, he purchased treasures on three or four days of the week.

Plans for the Fed to reinvest the proceeds of the maturation of the securities in its portfolio, but slows with no new purchases, the schedule for purchase to a net of water.

The Fed bought only $ 2.91 billion Wednesday. A single purchase transaction is set for this period of two weeks. the Fed will announce an another annex purchase July 13.

"We do not think there is enough appetite for risk and money around, fixed income foreign and domestic, to slightly more attractive levels of performance, is prepared to put some species to work.", said Adam Brown, co-maintainer of the Treasury negotiated at Barclays Capital in New York.

(Editing by Jan Paschal)

Rates mixed at weekly auction (AP) the Treasury bills

WASHINGTON - interest rates on short-term Treasury bills were mixed at the auction on Monday. Rates on three-month bills are unchanged, while rates on six-month bills fell to the lowest level since November.

The Treasury Department established auctions of $ 29 billion in three months at a discount rate of 0.150%.

28 Billion in bills of six months has been auctioned at a discount rate of 0.180%, down from 0.190% last week. Six-month rate was much lower because these bills by an average of 0.160% November 8.

The discount rates reflect that bills are selling for less than face value. For a bill of $10,000, the price of three months was $9,996.21 while a six-month Bill has sold for $9,990.90. Which is roughly equivalent to an annualized rate of 0.152 per cent bills for three months and 0.183 per cent for the six-month bills.

Separately, the Federal Reserve said Monday that the average yield for a good year Treasury index popular for making changes in mortgage rates, falling to 0.29% week last 0.30% the previous week.

Treasury gets 12 billion of outstanding Citi (CNN)

Taxpayers scored a bonus of $ 12 billion that the Government washed his hands of one of its biggest orchestrated, Citigroup.

The Treasury Department said Monday afternoon that it expected 2.4 billion Citi (C) sell stock in an underwritten offering. Later in the evening, the Treasury Board stated that the offer was $4.35 per share - price giving the Government a profit of 12 billion over its $ 45 billion Citi bailout.

Closing time

The Government paid the equivalent of $3.25 per share for its participation in the No. 3 u.s. Bank by assets. Count of revenues from the sale of stock, dividends and interest on loans rescue, the Government received 57 billion in compensation for replenishment of Citi, said the Treasury Board.

"Sell the remaining issue ensures that the taxpayers will be book profit health on their investment in Citigroup," said Linus Wilson, Assistant Professor finance at the University of Louisiana at Lafayette and a long bailout tracker date.

The announcement comes at the right time for the Government with policy makers to take their last bailout beating courtesy of newly released loans crisis Federal Reserve details. Although the Bank grants are proved much less expensive that first estimates suggested they remain deeply unpopular due to a failure to empower major crisis - Government - bankers for their misssteps actors.

Also, it is less than one year following the Citi and Government reached an agreement that erased the Citigroup way to repay the Government during the darkest days of the end of 2008 and early 2009 massive bailout package. This market also provides the Federal Government within the week next to complement their share sales.

The Government has Citi 45 billion in loans help property injured during the crisis. Many last December with injury early in 2009 for a large part of the TARP Government preferred shares convert to common shares, left, the Federal Government with a stunning actions of 7.7 billion Citi, representing a 27% stake.

Last spring, the Treasury Board began to dribble the shares on the market. The Government has succeeded in reducing its participation of approximately two-thirds without affecting the price of the shares, Wilson research has shown.

The slower than expected sales pace leaving the Federal Government with a sizable piece Citi shares as transaction crafts birthday last year. But Citi shares have actually increased since one month, despite declining among the concerns on the solvency of Europe and legal exposure of the banking industry for what is called foreclosuregate Bank stock index.

Wilson said that Government averaged nearly $4 a share on sales of stocks of the Citi in October and, since the Federal Government were able to sell an addition shares of 900 million at a time when the market price has generally increased.

Government will be always good warrants for common shares of Citigroup which have been issued for the participation of Citigroup in the Treasury Board programs, said the Treasury Board, and the Government may obtain up to 800 million in securities trust preferred unless the Federal Deposit Insurance Corp. loses money Citigroup debt under the liquidity guarantee program temporary of the backup.

But overall, Citi and the Federal Government will be free for the first time since the crisis, which is an arrangement that everyone can be satisfied.

"I am delighted that US Treasury took action today to keep its promises to the Citigroup investors and managers of selling game of taxpayers by 14 December 2010," said Wilson.