Many Investors Pass on Latest Treasury Sale

The government’s budget surplus means the Treasury’s borrowing needs are shrinking--but apparently not as fast as investor demand for Treasury debt.

The Treasury’s auction of $15 billion in two-year notes on Wednesday met with such poor demand that investors’ total bids were just 1.83 times the auction amount--far below the average ratio of 2.41 in the previous 10 note sales, and the weakest demand since March 1983, according to R.H. Wrightson & Associates.

The yield on the notes was 5.009%, above expectations.

Investors’ lack of buying interest suggests that many believe that the Federal Reserve is likely to raise interest rates in coming months, affording higher yields on shorter-term notes and bonds for those who are willing to be patient.