On Wednesday there was a $16 billion 20 year bond auction. Supposedly it went well, but demand was strong only because yields have really shot up in the last couple of weeks. In fact, the high interest rate was 5.12%, up significantly from last month’s 4.88%. I will note again that these higher interest rates, lead to higher interest payments and more spending and more debt for the federal government. The rate was right as expected. Overall demand was actually slightly weak, despite the higher yield, but foreign buyers chipped in at the usual level.
On Thursday the only other auction occurred, $19 billion of the ten-year inflation protected note. The real yield, or the yield after expected inflation-related interest payments, was 2.17%. This real yield has been creeping up a bit. This residual reflects investor concerns about repayment more than inflation, since the note is inflation-protected. Demand was about around average. Interest rates on US debt in the aftermarket have been creeping up for several weeks, largely driven by Iran, but they eased toward the end of this week.
