Only a couple of longer-term auctions this week. The first was a 20 year bond, $13 billion of which priced at a 5.47% high yield, higher than expected, and as with the auctions last week, an astounding half a percentage point higher than last month’s auction. Overall demand was mediocre and foreign demand was poor, despite the very high interest rate. Thursday’s five-year inflation protected note auction was better, although the buyers may have been a little disappointed. Discombobulation in the stock market let to increased buying of US debt in the after-market and a lower real or after-inflation yield of 2.37%, below expected but the highest in three years. Demand was weak. So it wasn’t a great auction for either buyers or the US government, but what could have been anticipated given after-market volatility swinging on every moment’s news from Iran, Ukraine, the election, etc. The high real yield, however, is a continued warning to US policymakers that they better get debt under control. Investors are demanding an increasing premium to buy it.
