U.S. sells two-year debt at highest yield since 2010

NEW YORK (Reuters) - The U.S. Treasury Department on Wednesday to sold $26 billion of two-year debt issue at the highest yield in over 5-1/2 years as traders speculate whether the Federal Reserve will raise interest rates in December.

The Treasury paid investors and dealers a yield of 0.824 percent on the latest two-year note issue due Oct. 2017 <912828TW0=>. This was the highest yield at a two-year auction since the one held April 2010 when the two-year note was sold at 1.024 percent. .

Overall bidding for the two-year note was the weakest in 5-1/2 years.

The ratio of bids to the amount offered was 3.01, down from 3.27 at the prior auction in September and the lowest since 2.93 in May 2010.

"Bidding details were also disappointing," Stone & McCarthy Research Associates analysts wrote in a note. "Demand was weak from all three bidder categories," they added.

Fund managers, central banks and other indirect bidders bought 48.92 percent of the latest two-year offering, down from September's 43.22 percent and their smallest share since April.

Small bond dealers and other direct bidders purchased 11.03 percent, smaller than September's 13.31 percent.

Primary dealers or the top 22 Wall Street firms that do business directly with the Fed bought 48.92 percent, up for a third straight auction and their largest share since December 2014.

The two-year note sale had been scheduled for last week but was postponed as it was unclear whether the Treasury could settle the auction before the White House and top Republican lawmakers reached a deal to extend the federal debt ceiling.

On Monday, President Barack Obama signed into law a two-year budget and suspension of the debt limit into March 2017.

Investors were selling two-year notes prior to Wednesday's auction in reaction to remarks Fed Chair Janet Yellen who said before a House panel that a rate hike in December would be a "live possibility" if the economy improves further.

(Reporting by Richard Leong; Editing by Chizu Nomiyama and Alan Crosby)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Fed's Hammack: Would Probably Need 'some Number' Of Rate Hikes
• Change in Nonfarm Payrolls (Jul) -23K vs 80K Expected, Unemployment Rate 4.1%
• Payrolls miss cuts Fed hike odds as Asia rallies and oil firms on Hormuz stalemate