Kind of unusual but on Monday both two-year and five-year notes were sold. The two year auction consisted of $68 billion, with a high yield of 3.92%. Foreign buyers accounted for about 56% of the purchases, domestic buyers for 34% and dealers were left with only around 10%. Then the five-year auction occurred, $70 billion, with a high yield of 3.98%, higher than last month and higher than expected. Demand was weaker than usual and foreign buyers were about 58% of the auction, also lower than anticipated. The two-year auction wasn’t bad, but the the five-year wasn’t good. The aftermarket generally traded up following the auctions.
Yesterday, there was an auction of $$44 billion of seven-year notes, which went off quite well. The high yield was 4.09%, which was higher than last month but lower than expected. Overall demand was good, but foreign buyers were down as a total of the sale. This morning, it appears that rates are slightly down for overall US debt. The Federal Reserve Board is meeting and apparently unlikely to lower their benchmark rates, despite Trump’s pleading and bashing, due to ongoing concerns about the inflationary effects of higher tariffs and other factors. In the long run, I believe the primary factor in the yields on US debt will be the fiscal condition of the US. Currently we continue to run large deficits and issue massive amounts of new debt. This was a relatively quiet week for debt issuance and it was still $182 billion worth. That doesn’t include all the very short term Treasury bills that are issued every week.
