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Treasury easily sells record $40 billion in two-year notes

The bond market had a welcoming gift for new Treasury Secretary Timothy Geithner today: The government had no trouble selling a record sum of two-year notes.  Strong bidding at the auction of $40 billion of notes could help allay worries that the Treasury's massive borrowing plans for this year will run into waning investor demand.

The auction also is a sign that many investors remain too fearful to put their money into anything without an iron-clad guarantee of principal.

"It tells you everybody's still looking for safety," said John Canavan, a fixed-income analyst at Stone & McCarthy Research in Skillman, N.J.

Investors put in $107 billion in bids for the two-year notes, compared with bids totaling $81 billion when the Treasury offered $38 billion in two-year securities for sale last month.  The annualized yield on the new two-year T-notes was 0.925%, just slightly above the yield at the December auction.

Still, shorter-term securities typically are easier for the government to sell than longer-term issues. Yields have rebounded on 10-year and 30-year Treasuries in recent weeks from last month's record lows, suggesting that investors were beginning to pull back.

Regarding the Chicago School allegations regarding stimulus spending cited in today's open thread, perhaps the easiest way to get money from the wealthy spent on socially useful investments in this climate is for the government to borrow the money from them via treasuries and then for the government to spend that money on investments said wealthy business people are afraid to do themselves.  They have made such a mess of things they prefer 2% with a government guarantee to any alternatives.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jan 27th, 2009 at 06:19:30 PM EST
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