NEW YORK — Treasuries fell Wednesday for the first time in five days as a strengthening economy added to concern the Federal Reserve is closer to reducing bond purchases and held demand at the government's auction of seven-year notes.
The bid-to-cover ratio at the auction, which gauges demand by comparing total bids with the amount of securities offered, was 2.36, the least since May 2009. Demand was higher at auctions of two- and five-year notes the past two days amid speculation the central bank will keep short-term interest rates lower for longer. Reports showed improvements in consumer sentiment while the Chicago Business Barometer was higher than forecast and initial claims for unemployment insurance declined last week to the lowest level in two months.
"The auction was very sloppy," said Thomas di Galoma, head of U.S. rates sales at ED&F Man Capital Markets in New York. "Forward guidance takes you out to five years. Seven years is no man's land."
The benchmark 10-year yield gained three basis points, or 0.03 percentage point, to 2.74 percent. The price of the 2.75 percent note maturing in November 2023 dropped 1/4, or $2.50 per $1,000 face amount, to 100 3/32. The yield is up 19 basis points this month, the first increase since August.
The yield on the current seven-year note rose three basis points to 2.07 percent.
The Treasury market will be closed worldwide Wednesday for the Thanksgiving holiday, according to the Securities Industry and Financial Markets Association website. SIFMA recommended a 2 p.m. close in New York on Nov. 29.
The bid-to-cover ratio at the note auction, which gauges demand by comparing total bids with the amount of securities offered, was 2.36, compared with an average of 2.59 for the previous 10 sales. The seven-year notes drew a yield of 2.106 percent, compared with the forecast of 2.088 in a Bloomberg News survey of six of the Fed's 21 primary dealers.