New year, same old story in regard to the US debt and the deficits which are running that debt up. The first two notable auctions of the year occurred on Monday, $57 billion of three-year notes and $39 billion of ten-year notes. For the benchmark ten-year note, high interest rate was basically unchanged from December’s auction at 4.17%, also right around where expected. The overall demand metric was similarly essentially unchanged from the last few auctions of this series. Foreign demand was also in line, and there was little movement in the aftermarket. The three-year note auction similarly was pretty unremarkable. The high interest rate was 3.6%, as expected, and overall demand was similarly as usual. As a reminder you can find all the auction result data here. (Auctions)
And a quick update, today there was a thirty-year bond auction, $22 billion worth (please note that there isn’t a lot of appetite for a huge amount of long-term US debt–no one wants to get stuck with it for 30 years). The interest rate was 4.83% higher than in December but slightly lower than expected (the “when issued” price is the “expected” interest rate). Overall and foreign demand were somewhat better than in recent auctions. This sale was facilitated by the morning’s CPI report, as described below.
One reason the debt market may be relatively calm for now is that inflation appears to be somewhat under control. The just released inflation number for December shows 2.7% year-over-year, with the “core”, i.e., excluding everything people have to buy, like energy and food, was up a smaller 2.6%, the lowest in five years. Concerns would be that housing costs and food costs rose at a faster pace. People are very sensitized to those items. While inflation has come down from the Bidementia years, it is still above the supposed Federal Reserve goal and still high enough to make people have ongoing “affordability” concerns. And one area I watch closely, medical care, is still posting price increases well above general inflation. (BLS Release)
