Latest Treasury Debt Sale Dud

Today was 20 year bond auction day.  It was a disaster.  I find it hilarious that so many mainstream economists and finance professionals keep trying to ignore the supply and demand problem that US debt has, a problem that is going to get far worse.  Ten, 20 and 30 year bonds are in big trouble because no one thinks the US will get its fiscal act together anytime soon, meaning never-ending trillion dollar plus deficits and more and more debt.  I wonder how many dreadful auctions it will take before the Federal Reserve wakes up and realizes it will look really stupid when it tries to cut rates the market still demands high interest rates to buy increasingly risky US debt.

The specifics of today’s auction, found as usual at Zero Hedge, but also available on the Treasury site I have previously linked to, are that the interest rate the Treasury had to pay was more than it expected or tried to set, by the largest amount on record.  The rate was significantly higher than that on 20 year bonds issued just a month ago.  Dealers were stuck with a higher than average amount of the auction.  Rates on all longer-term Federal debt instruments rose as a result.  Expect more of this every month, especially when we get to summer and Treasury is selling huge amounts of rolling over debt.  There simply are not enough domestic and foreign individual, corporate and institutional buyers of for all the supply being issued.  (ZH Post)