On Tuesday, a supposedly good auction kicked off the week. $58 billion in three-year notes. While the auction priced at a rate below expected, it also had a high interest rate of 3.9%, way up from last month’s 3.58%, so why people say this was a good auction puzzles me. It did have strong demand, especially foreign demand at 75% of the entire auction, but again, demand is related to the interest rate–at a high enough rate you can get lots of demand. What should concern taxpayers is that these higher rates mean bigger US deficits and even more debt issuance.
On Wednesday an auction of $39 billion in ten-year paper was held, and no one was saying this one was particularly good. The high interest rate was 4.28%, up slightly from last month’s 4.22% and a bit higher than expected. Obviously the Iran ceasefire hasn’t resulted in a decline in rates yet. Overall demand was slightly below recent averages and foreign demand was somewhat weak. Anything on the somewhat long end is showing weakness.
Finally, on Thursday $ billion in 30 year bonds was auctioned; this is the longest term US debt vehicle and the one most sensitive to inflation and other interest rate concerns. $22 billion was sold at a high interest rate of 4.88%, basically unchanged from last month. Demand was also just slightly lower than recent averages, including foreign demand. Just a very average, mediocre auction, largely because buyers don’t really know what is going on in Iran and the MidEast and how that will all end.
