Treasury Market Rates Remain Stable

The interest rates in the secondary market for Treasury securities have moved only modestly in the past eight trading days. Today, Monday November 7, was no exception:

Table 1

Source: U.S. Treasury

The trend is still upward from the last auction for all maturity classes, but that trend is weakening. The strongest upward pressure is in the 30-year bond, which is being auctioned on Thursday. We expect the median yield at the auction to land north of 4.1 percent. 

Another noteworthy auction is the 10-year note, scheduled for Wednesday. The maturing batch of this note is worth $24 billion and sold at a median yield of 1.63 percent. The annual fiscal cost of this batch was $391 million. With the latest auction yield at 3.85 percent and current market yields running at approximately 4.2 percent, we expect the Wednesday auction to produce a yield in the 4.0-4.1 percent range. 

At four percent flat, and an accepted volume identical to the $32 billion from the last two 10-year auctions, the annual fiscal cost of this new batch would be $1.28 billion. This would in other words raise the fiscal cost of the replaced batch by the increased interest rate, equal to $569 million, plus the cost of an extra $8 billion borrowed. The total increase in the fiscal cost would therefore be $889 million.

Again, this is an experiment to illustrate the trend in the fiscal cost of the federal debt. The actual numbers will be known on Wednesday.

As of today, the average interest rate on the national debt, per our model, is an estimated 2.02 percent. This is up from 1.87 percent at the start of the current fiscal year. 

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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.