Sharp Marginal Yield Rise in Monday Auctions

On Monday, the U.S. Treasury sold $65.8 billion worth of 3-month (13-week) bills. Tendering $157 billion, the auction produced a tender-auction ratio of 2.39 and a yield of 4.05 percent. 

This auction replaced $62.4 billion worth of maturing 3-month bills, on which the yield was 2.42 percent.  The yield on the bills sold at Monday's auction was the first above 4 percent for this maturity class, though up only modestly from last week's 3.95 percent. 

However, the total yield cost for the debt sold at Monday's auction is 75 percent higher than for the expiring debt under the same maturity.

The 2.39 T/A ratio was close to the 2.41 for the expiring debt. It was also in line with last week's 2.40 and the 2.34 ratio from two weeks ago. 

The other Monday auction sold $52 billion worth of 6-month (26-week) bills. This auction tendered $139.5 billion for a T/A of 2.68. this is notably higher than for the past two weeks' 2.41 and 2.49. The auction produced a median yield of 4.405 percent, up from 4.33 percent last week and 4.19 percent two weeks ago. 

Technically, this auction replaced $49.5 billion worth of expiring 6-month bills, which paid 1.38 percent. The cost of the yield on the debt sold today is 235 percent higher than for the expired debt under the same maturity. 

Both auctions sold more debt than expired under each maturity. The increase in cost of new vs. expired debt is a direct consequence of the rapid rise in interest rates in recent months. Even if auction yields stop rising, these marginal-cost increases of the debt will continue to pull the average cost of U.S. debt upward for an extended period of time. 

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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.