Tuesday $58 billion in three-year notes, high yield of 4.18%, down slightly from last month’s 4.19%. This rate was a little lower than expected. Overall demand was a little less than recent auctions, but generally in line over the last couple of years, and foreign demand was a little above that in recent auctions. Renewed tensions around Iran are raising oil prices again and inflation concerns, although it appears to me that the oil producing nations have made immense progress to avoiding the Hormuz Strait.
On Wednesday, a $39 billlion ten-year note auction, that again for reasons that elude me was referred as strong. Nothing strong about a yield of 4.58%, which while lower than expected was higher than last month’s 4.54%. I keep saying that demand is related to interest rate and vice versa, and the higher rate drew strong overall demand and foreign buyers bought over 80% of the auction which is excellent.
Capping the week was the longest term security currently being sold, $22 billion in 30-year bonds. The high rate was 5.06%, the highest rate since 2007, although slightly lower than expected. Demand, again linked to the rate, was above average and the foreign buyer proportion of the auction was very high. If you look at the demand characteristics, you can call this a great auction, but the rate is more important for the future of the country, and this is a very bad auction by that metric. We are having to offer ever increasing interest amounts to get buyers for the debt.
