Things haven’t been going well for the US Treasury Dept lately.
Last week’s three auctions all tailed and today, on-the-run 20s have risen 7.9 bps to a cycle high of 5.25% ahead of the sale.
The November refunding announcement is expected to bring even larger auction sizes, so today’s demand for $13 billion in bonds could be soft. In addition, the market appears to be waiting for 10s to hit 5% now before anyone steps in. They’re trading at 4.91% today.
“We’re skeptical investors’
latest attempt to reintroduce term premium into the long end of the curve has
run its course given we still haven’t received clear fundamental confirmation
via the hard data the real economy is slowing,” write BMO today.