The trend of poor auctions continued early in the week, as a $69 billion in two year notes priced on Tuesday at 4.79%, a huge jump from last month’s 4.2% and higher than expected. Since much this is in essence rollover of two-year notes issued two years ago, the interest rate is far higher than it was on the rolled-over notes and adding greatly to the deficit. Overall demand was good, as it should be at that interest rate, but foreign buying was slightly lower than average. No sign yet that buyers believe inflation will ease significantly.
And Wednesday brought an even worse 5-year note auction, $70 billion at 5.03%, up incredibly from last month’s 4.39%. The rate was higher than expected and is one of the highest ever for this security. And even this high interest rate wasn’t enough to draw buyers, overall demand was extremely weak as was foreign demand. In the aftermarket rates rose even higher. At some point the government has to get serious about eliminating the deficit and begining to reduce the debt pile.
Thursday wrapped up the week with another bad auction, $44 billion in 7 -year notes. The interest rate was 5.09%. This is the highest interest rate ever on the 7-year. It was, like the 5-year yesterday, up hugely from the prior month’s 4.51% and was higher than expected. Demand was also not great, both overall and from foreign buyers. Bessent needs to get real that the only thing that will lower interest rates at this point is a big drop in oil prices and/or a significant reduction in the deficit.
