It is long-term debt auction week. Tuesday began with $13 billion in 20-year bonds. (Note that the long-term auctions are smaller in size. I don’t know why; if the Treasury thinks market-driven rates are going down anytime soon they are crazy. More likely direction is up, so why not load up on more long-term debt at what may be the best rates in a long, long time.) The high interest rate was 4.82%, up from last month significantly, but not out of line with the average in recent months. Overall demand was good, but why wouldn’t it be when the rate paid is so high. Foreign buying was also good. Some commentators called this a good auction, but when we have to keep paying higher rates to get people to buy our debt, I don’t think that is a positive.
Today there was a ten year TIPS auction, the inflation protected US debt. It is hard to interpret results but it supposedly gives you some sense of inflation expectations and of residual return demands which may reflect financial concerns. The $19 billion auction had a real yield of 1.9%, slightly higher than expected but lower than most recent auctions. The Iran strikes undoubtedly are influencing these auctions. Demand was good, slightly above recent averages.
