On Wednesday, a 20-year bond auction, $13 billion in face value. The high interest rate was 4.51%, which over half the accepted bids were at that rate. That rate was signficantly higher than last month, but lower than expected. Overall demand was good and the foreign buyers stepped up at about the usual level. So all things considered, with so much uncertainty, this was kind of a mixed auction. You might expect more of a flight to safety, but US debt isn’t that safe anymore.
Thursday there was a 5-years TIPS or inflation protected note auction. At 1.18%, this was a much lower yield than the similar June and April auctions. $26 billion of these notes were sold, about in line with other recent auctions. Demand was moderate, as was foreign demand. Theoretically you get a sense of what investors believe risk outside of inflation will be from the TIPS auctions and this real yield suggests little concern about repayment. Not sure if there is a “flight” to inflation-protected securities; the moderate demand would suggest not.
If you want to read more about how to interpret TIPS auction results, see this excellent website. (TIPS Site)
