Well, here we go with another big week in US debt issuance. Tuesday started it off with $58 billion in 3-year notes. the high interest rate was 4.19% up significantly, in interest rate terms, from the 3.97% in May. It was also slightly higher than expected. The trend has been up for the last year. Overall demand was a little higher than usual. The all-important foreign buying was in line with recent averages.
Wednesday was the key 10-year note’s turn, with $39 billion at a high yield of 4.54%, up again from last month. Some people say it was a good auction, but anytime yields are continuing to trend higher month after month, there is nothing good happening unless you are an adversary that wants to see the US drawn in debt. Overall demand was good, above the recent averages, while foreign demand was very high at 78% of the entire auction. Of course, if the yield is high enough, you can get high demand from overseas buyers.
Thursday finished off the week with a 30-year bond auction. Some described it as bad, but again, I always look at the interplay of interest rates and demand. $22 billion of the bonds were sold, with the high yield being 5.02%, which was actually down a bit from last month’s 5.05%. But this is two auctions in a row over the 5% mark, which is rarely reached. Overall bid to cover, or total demand, was close to recent averages. Foreign demand was substantially below average, but domestic buyers stepped up to cover most of the shortfall. My interpretation is that domestic buyers were willing to accept a somewhat lower interest rate than foreign buyers. It isn’t like the yield had to go way up to get buyers in. In any event, what is bad is that 5%, which is far above where the 30 year rate was even two years ago.
