Kind of a weird auction schedule this week, with two auctions on Monday. The first was a two-year note, $69 billion in face value, sold at a high interest rate of 3.81%, a nice drop from last month’s 3.94%, but a little higher than expected. Overall demand was better than last month and about in line with the recent average, but foreign buying was weak. It is good to see interest rates moving in the right direction, at least for this auction.
Then we also had $70 billion in five-year notes auctioned, high rate of 3.96% down from last month’s 3.98% but only very slightly, and higher than expected, as with the earlier two-year note auction. Overall demand was up from a very weak auction last month but still below the longer term average demand. Foreign demand for this issue, however, was quite strong. After-market yields are up, but everything is going to be very volatile until the Iran situation is completely resolved.
On Tuesday, $44 billion in 7-year notes was auctioned, again with fairly weak results. The high interest rate was down to 4.18% down from 4.26% the prior month, but again slightly higher than anticipated. Overall demand was somewhat better than the recent average, going by the amount of bids entered compared to the auction amount, but foreign demand was below average. Domestic buyers made up the difference. Aftermarket rates continue to fluctuate but are generally higher as energy cost concerns dominate. We are nearing the 5% level for 30 year bonds which is a psychological barrier of sorts. And that is the auctions for this week.
