Free Markets, Free People

Treasury bonds – the canary in the coal mine?

So how did our latest treasury bond sale go.  As you read the following remember that for the seller bonds are like golf – higher is not better:

The Treasury Department sold $42 billion in 5-year notes on Wednesday at 2.605%, higher than traders had anticipated. Bidders offered to buy 2.55 times the amount debt being sold, the lowest since September. That metric of investor demand also compares to 2.74 times on average at the last four sales of the securities, all for the same amount. Indirect bidders — a class of investors that includes foreign central banks — bought 39.6% of the offering, compared to an average of 49.6% of recent sales and the lowest since July. Direct bidders, including domestic money managers, purchased another 10.8%, versus 9% on average. After the auction, yields remained sharply higher in the broader government-bond market as corporate and other higher-risk debt drew investors away from Treasurys. Yields on 10-year notes, which move inversely to prices, rose 13 basis points to 3.81%.

The question, of course, is “is this an anomoly or the beginning of a trend”? Given the financial condition of the country, the presistent warnings and threats of AAA downgrades by such ratings firms as Moodys and the forecast trillion dollar deficits for the next 10 years, I’d say its most likely the latter. In layman’s terms, our debt is getting harder and more expensive to sell.



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