The yields on U.S. Treasury securities continued their march upward in today's market trading. Below are today's yield's, the yields on Friday, and the latest auction yields:
The market yield for every maturity exceeds their latest auction yield. The biggest disparity is in the 1-year bill, where the current market yield is 118:100 relative the October 4 auction. This is expectable, given the steady upward trend in yields and the time since the last auction.
The 7-year note also exhibits a major yield disparity, with markets paying 112:100 relative the September 28 auction yield.
The next auction for the 1-year takes place on Monday November 1, while the 7-year auction is held on Thursday this week. We expect both to break the 4-percent margin with 0.25 percentage points for the 1-year and at least 0.1 percentage points for the 7-year.
Today's auctions in the 13- and 26-week bills kept unchanged the weighted average tender-accept ratio for the U.S. debt. It has remained just a tick above 2.43 since Thursday last week, when it fell from 2.44 on Wednesday and 2.52 the preceding Tuesday.
The T/A ratio is an important indicator of the liquidity at Treasury auctions. The lower the ratio, the closer the U.S. government gets to a point where interest rates will rise entirely on the security buyer's terms. This, in turn, is an estimate of the point often referred to as a fiscal crisis.
Another indicator for predicting a fiscal crisis is the cost of the U.S. debt over a fiscal year, Currently, our model estimates the weighted, annualized, interest rate of the $31,228.6 billion debt to be 1.95 percent—up from 1.87 percent at the start of October—which equals $608.6 billion.
According to our model, if interest rates continue to rise at auctions with the same trend as they have since October 1, the start of this fiscal year, the total cost for interest payments on the debt would be $799.2 billion. This figure is based on a constant-debt basis, i.e., that the $31.2 trillion U.S. debt as of October 21 would remain unchanged until September 30, 2023.
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We do not give investment advice.
This blog provides analytical information solely for the purposes of 1) predicting the cost of the federal debt, and 2) for assessing the risk for a U.S. fiscal crisis. All information published here, forecasting and other, is based on publicly available data from the U.S. Treasury, including but not limited to approximately 65 percent of the current debt; on macroeconomic data, including but not limited to monetary policy decisions by the Federal Reserve; and on macroeconomic theory.
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