Here We Go, One of the First Long-end US Debt Auctions for 2025

It was “only” $13 billion in 20 year bonds.  I say only because the Treasury is still trying to convince itself that it doesn’t need to issue a lot of long-term debt because shorter-term debt rates will be going down soon–ha, ha.  The recent short-term issuance has been in the area of $50 to $70 billion.  But the rates aren’t much lower.  Now without getting two technical, today’s sale was a “reopening” of a prior issuance a couple of months ago.  To show you what is really happening with rates, today’s auction priced at an interest rate of 4.9%.  But the original issuance in September priced at 4% and just last month it priced at 4.66%.  The rise in rates this fall and winter has been spectacular, during a time when the Federal Reserve was cutting rates.

Not surprisingly, demand was very strong.  It looks to me that any time rates get near to 5% on a longer-term debt issue, there is good demand.  And it takes that level of interest rate to generate that level of demand.  So more evidence that rates are unlikely to decline any time soon.   If the US wants to keep running huge deficits and selling huge amounts of debt, we will need to pay people more interest to buy that debt.