Treasuries fell for the first time in five days as the U.S. received the lowest demand at a five-year note auction this year with investors speculating the Federal Reserve is moving closer to raising interest rates.
The $35 billion sale’s bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.56, the lowest since December and versus an average of 2.75 for the past 10 sales. The Fed’s 22 primary dealers were left with 41 percent of the notes, the most since January. Government securities headed for the steepest monthly loss this year after central-bank officials raised their median forecast for borrowing costs.
“The weak auction is reflecting a market that realizes that we are at a crossroads — the Fed seems on course to raise rates,” said Carl Lantz, head of interest-rate strategy in New York at Credit Suisse Group AG, which as a primary dealer is obligated to bid at U.S. auctions. “The market is finally starting to trade with that in mind, and it’s clear that time isn’t on your side anymore.”