Thursday, March 25, 2010

U.S. bond rates rise after third day of weak auctions

As blogging topics go, U.S. treasury auctions are not really very interesting to my readers, or, for that matter to me.  But recent auctions that will fund the out of control spending of our Democratic Congress, should warrant your attention.  From Reuters:
Prices of U.S. government debt fell on Thursday as demand for Treasuries waned for the third day in a row.

Prices fell further following a weak auction of $32 billion in seven-year Treasury notes. The high yield on the auction came in at 3.37 percent, above the market's expectations.

"The auction went terribly," said Tom Simons, money market economist at Jefferies & Co. "It appears the foreign bid was on the sidelines again as we approach Japanese year-end (March 31)."

Thursday's auction capped a week of $118 billion in new supply which met with a lukewarm reception in the marketplace.

Benchmark 10-year Treasury notes US10YT=RR fell 6/32 in price to yield 3.89 percent, up from 3.86 percent at Wednesday's close. In intraday trading, 10-year yields reached a nine month high of 3.93 percent.

The seven-year note US7YT=RR dropped 6/32 to yield 3.33 percent, up from 3.29 percent on Wednesday.

Fresh worries about government bonds issued by Greece and Portugal contributed to investors' wariness of sovereign debt, analysts said.

The price of insuring U.S. debt against default rose. Credit-default swap spreads grew to 40 basis points, while the yield on U.S. 30-year bonds reached a nine-month high.
Translation:  Demand for U.S. debt instruments is weak.  The supply of U.S. debt is growing (exponentially).  The government will be forced to increase the incentive (interest rate) to purchase U.S. debt.  Budget deficits will increase.  National debt will increase just to service the debt we have.

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