First up this week was a two-year note auction, $68 billion worth with a high interest rate of 3.64%. The interest rate was lower than last month’s similar auction and a little lower than expected. Foreign buyers took about 58% of the auction, domestic demand was good. Overall demand was a bit above recent averages.
Wednesday, $70 billion in five-year notes was sold, high yield of 3.72%, lower than July, but slightly higher than expected. Foreign demand was weak, but domestic demand made up for that, so the overall demand was about on the recent average. In the aftermarket, rates were slightly lower. Big picture–huge amounts of debt being issued, buyers still taking it at close to expected rates, but much higher than two years ago and the interest portion of the US budget is still rising at a rapid pace.
Then today $44 billion in seven-year notes was auctioned. Please note the total issuance for the week, not counting short-term bills–$182 billion!! This auction was not good–higher interest rate than anticipated, 3.95% although lower than last month. Demand was quite weak, especially from domestic buyers. Foreign buying was high, likely due to to lackluster response to the auction from domestic buyers. Dealers ended up holding a higher than usual portion of the auction.
The market for US debt has many cross-currents, there is all kinds of currency-related buying and other factors than can affect these auctions. But this is definitely true–interest rates are much higher than they were, the total interest paid on US debt is high and growing and there is no end in sight.
