Auctions Confirm Interest Rate Stability

The Treasury sold a total of $45.89 billion in debt on Wednesday, of which $33.89 billion consisted of 17-week bills. The accepted amount was identical to last week's auction, with investment tenders increasing marginally from $98.56 billion last week to $99.89 billion. This pushed the T/A up from 2.91 to 2.95, the highest in four weeks. 

The 17-week auction sold the debt at a median yield of 4.37 percent, well in line with the five most recent auctions. 

At the 20-year auction, the Treasury sold $12 billion against $32.18 billion in tender offers, raising the T/A ratio from last week's 2.48 to 2.68. The amount sold was identical to the auction three weeks ago, the last time the Treasury sold 19-year, 11-month bonds under this maturity class. The median yield of 3.899 percent is yet another small decline for this maturity class: last week's auction sold at 4.01 percent, and the week before that at 4.319 percent. 

Since the 17-week is new, having existed only for ten weeks, and there is not enough historic data from the Treasury on the 20-year bond, we cannot calculate the rollover cost on the debt sold today. However, given that the interest rates in both cases kept their maturity classes at or just below four percent, with only a weak downward trend for the 20-year, it is fair to say that auction yields remain steady in the neighborhood of four percent. 

The same is true for the secondary market, where the inverted yield curve remains in place. The 4-week bill currently pays 3.9 percent, while every maturity from eight weeks to three years comes with yields in the 4-4.67 percent bracket. The 5-30 year maturities pay less than four percent, although there is a trend of slowly rising rates here. Here is a comparison of today's yields with where they were a week ago:

Table 1

Source: U.S. Treasury

The estimated average cost of the U.S. debt remains at 2.17 percent.

--

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.