More fun and games in the US debt market, as a variety of factors converge to push interest rates up and the Treasury Department desperately, and futilely, tries to keep them lower. We just have deficits that are too big and a mushrooming debt pile, now over $40 trillion. Not really much in the way of auctions this week, but still illustrative of the chaos. On Wednesday there was a $16 billion auction of 20-year bonds. The high interest rate was 5.20%, up from 5.16% last month and higher than expected, although lower than it would have been if the Treasury Department hadn’t of announced an expanded buyback at the long end before the auction. It was one of the highest interest rates on this bond ever. Despite the high interest rate, the overall demand metric was one of the lowest on record. Foreign buyers were also disinterested. We have a serious debt crisis, but Congress just ignores it.
The only other major auction for this week was a 30-year inflation-protected, or TIPS, bond. $8 billion sold at the highest real, or after inflation payment, interest rate in 25 years, 2.97%. Overall demand and foreign buying was in line with past averages. But that real interest rate says something about buyer’s concerns over US debt. As we head $40 trillion, I am seeing a lot more coverage of the issue and maybe at some point there will be enough public pressure to force action on the deficit.
