By Anthony B. Sanders
[Yesterday’s] US Treasury 30-year bond auction was strong. $13 billion were sold to the public and none purchased by The Fed for the first time since the December 12, 2017 auction.
So far, so good. Despite massive Federal spending and projected budget deficits, Treasury auctions are going well.
Continue reading 30-year Treasury Auction Strong With $13 Billion Sold To Public (None Bought By The Fed)
Now if we only knew the price…
10Y yields are back near their lowest levels since last month’s CPI beat, having given back Tuesday’s Jerome Powell-inspired spike that derailed equities.
They’ll be no shortage of narrative fodder on Thursday with Powell’s second act (this time in testimony to the Senate) and PCE on the docket, but panning out, the question still lingers: how high will yields go? And of course the follow-up that no one can answer: what is the magic number on 10s beyond which equities can no longer pretend not to care?
Here are the monthly yield changes for UST benchmarks from February:
- 2Y +10.9bp
- 5Y +12.6bp
- 10Y +15.6bp
- 30Y +18.9bp
As a reminder, the two-month rise in real yields (i.e. January plus February) was the largest since the election:
Just to be clear, folks are getting pretty deep into the weeds here when it comes to forecasting yield levels given a set of assumptions. And by “deep in the weeds” I just mean that people are bending over backwards to find a reliable framework for forecasting. It’s not so much that the methodologies being employed are particularly innovative (this isn’t exactly rocket science), it’s just that the amount of time being spent on it is probably some semblance of absurd considering the inherent futility of trying to accurately forecast this. Here’s BofAML’s latest:
Continue reading Here’s Who Will Buy All That Treasury Supply
By Anthony B. Sanders
Both Larry the Cable Guy and Treasury Secretary Steve Mnuchin would be proud of this week’s Treasury auctions. The “Git-R-Done! Auctions
(Bloomberg) — The U.S. Treasury’s $29 billion auction of seven-year notes drew the highest yield for securities at that tenor since 2011, capping a $258 billion flood of debt sales over three days.
Continue reading Treasury Seven-Year Sale Caps $258 Billion Week of Higher Yields (Git-R-Done!)
By Michael Ashton
With interest rates flirting with 3% on the 10-year Treasury note, and the potential (and eventuality) that they will go significantly higher, I thought it might be timely to review a blog post from February 10, 2013 called “Limits on the 500-pound Gorilla.” (It’s worth reading that original post for some of the comments attached thereto.)
Well, here’s an interesting little tidbit. (But first, a note from our sponsors: some channels didn’t pick up my article from last Wednesday, “Fun With The CPI,” so follow that link if you’d like to read it.)
The Fed adds permanent reserves by buying securities, as we all know by now. The Open Market Desk buys securities and credits the Fed account of the selling institution. Conversely, when the Fed subtracts reserves permanently, it sells securities and debits the account of the buying institution.
Continue reading Limits on the 500-Pound Gorilla