The week started off pretty bad, a continuation of last week, with a $58 billion sale of 3-year notes. The high interest rate was 4.93%, a big, big jump from last month’s 4.48%. These monthly increases are almost unprecedented. Please note that every maturity from three years on is trading at around 5% or higher. Overall demand was below recent averages, as was foreign demand. Even these very high interest rates are not attracting buyers, especially foreign ones.
On Wednesday, another bad auction, in my opinion, as $39 billion offering of the key ten-year note. Once more, a huge jump in high bid–5.3%, the highest in over 25 years and way up from last month’s 4.83%, although it was slightly lower than expected. The buying was weird, while overall demand was in line with recent averages, it was the highest foreign demand ever, far higher than recent averages, which is quite suspect, but perhaps that very high yield was too tempting to pass up. What is clear is that if this keeps up, the US deficit is going to grow by leaps and bounds as our interest payment burden soars.
And today we had the 30-year bond, a $22 billion auction, which followed every other auction in taking a massive leap up in the high yield in just a month, at 5.62%, up from 5.31% and once more, the highest for this bond in over 25 years. Overall demand and foreign buying were somewhat above recent averages, but why wouldn’t they be with interest rates heading to 6% for this important bond. At some point Congress is going to have to face the music or more likely the firing squad when voters realize just how much federal spending has to be cut to end the deficits.
