The stabilization of interest rates in the secondary market for Treasury securities, is now beginning to affect auction yields. The median yields at today's 4- and 8-week bill auctions dropped from last week.
The 4-week auction attracted $174.6 billion in tender offers, with $67.2 billion accepted. The accept volume is stable, while the tender volume is up. The T/A came out to 2.6, the highest recorded in several weeks.
With a median yield of 3.53 percent, this week landed below last week's 3.56 percent and the 3.55 percent from two weeks ago.
Investors made tender offers of $149.1 billion for the 8-week bills, of which $56.9 billion was accepted. The 2.62 T/A ratio is down from last week's 2.70 but equal to that from two weeks ago. The batches from the last three weeks have the highest T/A's of all active 8-week bills.
The median yield for the 8-week came out to 3.82 percent, which is down from 3.845 percent last week and only marginally higher than 3.78 percent from two weeks ago.
Yesterday the 4-week bill sold at a market yield of 3.65 percent, with the 8-week at 4.05 percent.
In addition to its shortest-term bills, the Treasury also auctioned its 30-year bond today. Attracting $58.2 billion in tender, the Treasury accepted $28.4 billion, for a T/A of 2.05. This is lower than 2.39 a month ago and 2.42 in September. However, as with the 10-year note and the 20-year bond, the 30-year runs in a three-tier cycle, where every third auction sells bona fide 30-year bonds, every third sells 29-year, 11-month bonds and every third 29-year, 10-month bonds. This system causes some variations in T/A rates and yields, but not enough to upset the long-term trend.
Looking exclusively at full 30-year bonds, the T/A has been below 2.00 for two years. The two shorter versions of this bond have also exhibited rising T/A ratios over the past year.
Yesterday we predicted that the 30-year will land a median auction yield of at least 4.1 percent. It came out to 4 percent flat, up from 3.85 last month (29y/10m), 3.45 in September (29/11) and 3.019 in August (30). The lower-than-expected rise in the yield keeps the 30-year below its current market rate of 4.31 from yesterday.
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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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