On Tuesday, a bad two-year auction, $69 billion worth. The interest rate was 3.8%, which was down from the similar auction last month, but higher than expected. But it was the closely watched foreign demand which was the real problem, taking only 56% of the auction, far below recent auctions. Domestic buyers stepped in, but in the long run if foreign buyers bail on US debt that is a real negative. Wednesday’s five-year auction of $70 billion went better. The high yield was basically 4%, but that is down a little from last month and slightly lower than expected. Demand from foreign purchasers was again weak but not as bad as with the two-year debt and once more the domestic buyers stepped up. Today, $44 billion in seven-year notes, at a 4.12% high yield, a little lower than last month, higher than expected. Poorer than normal foreign demand, okay domestic buyers. The US debt market is getting completely whipsawed by the trade/tariff chaos and it is showing. There are still some buyers willing to chase the relatively high yields, but if foreign buyers really begin to bail, its a big problem.
