The Treasury auction on Tuesday for 3-year notes attracted $116.8 billion in tender, with $54 billion accepted. T/A came out to 2/16 notably down from 2.57 a month ago and 2.49 in September. It is below most of the 3-year note auctions this year.
Median yield rose to 4.54 percent, up from 4.24 percent last month and 3.5 percent in September.
The maturing batch of 3-year notes, which today's auction replaced, accepted $56 billion at auction, out of $116.6 billion tendered, for a T/A of 2.08. The yield was 1.6 percent, which would turn out to be the highest median auction yield in 26 months.
The maturing batch cost U.S. taxpayers $896 million per year in interest payments. This new one will cost $2.45 billion per year, an increase in debt cost of just over $1.5 billion.
Before today's auction, the total amount of debt under the 3-year note was $2,161 billion at an auction yield of 1.03 percent. The new total debt amount under the 3-year note is $2,159 billion, at 1.1 percent per year.
The drop in the T/A ratio at today's auction caused the average estimated T/A for the entire U.S. debt to drop from 2.47, where it has been since November 1, to 2.435. This is not a dramatic change, but noteworthy: a trend of declining T/A is a sign of liquidity stress in the sovereign-debt market.
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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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