The week’s US debt auctions started out excellently. $42 billion of the closely watched ten year note was sold. The interest rate was a little lower than last month and lower than expected. Foreign and domestic demand was good. The sole negative I would note is that fantasy that somehow ten year yields are going to return to the 3% area.
Then on Thursday there was a pretty weak 30-year bond auction, somewhat larger than typical at $25 billion. Demand was mediocre, the interest rate was higher than expected and a little higher than last month’s similar auction. Foreign demand seemed okay.
The bottom line is that especially on longer-term debt, interest rates are remaining stubbornly high and very unlikely to go much lower unless and until real progress is made on the deficit and inflation is shown to be firmly under control.
