Market Reinforces Inverted Yield Curve

 In Thursday's auctions, the Treasury sold a total of $92.4 billion in debt. It was split evenly between the 4-week and 8-week auctions. Investor offers were not evenly split: $155.6 billion were tendered for the 8-week, with only $125.6 going toward the 4-week bill. 

The 8-week auction produced an unusually large T/A ratio: at 3.37, it went up significantly from last week's 2.76. It was also the highest in at least ten weeks. The T/A at the 4-week auction also increased, but only from 2.5 in the last two weeks, to 2.72. 

With a sharp rise in the T/A ratio, the 8-week auction came away with a lower median yield than last week: down to 3.9 percent from 4.08. This means that last week's batch of $51.6 billion 8-week bills is the only one currently that pays a yield above four percent. 

By contrast, the 4-week auction pushed the median yield up from 3.9 percent to 4.05 percent. No other active batch of 4-week bills pays above four percent.

The 4-week replaced a larger, maturing batch of $66.8 billion. The debt sold under the 8-week bill was close to the $46.9 billion that matured with this auction. 

As a result of the spike in the 8-week T/A ratio, the estimated average T/A for the entire U.S. debt now stands at 2.249, up from 2.234 yesterday and 2.232 the two auction days before that. 

The inverted yield curve we mentioned earlier in the week, remains in place. In today's secondary-market auctions, the yield on the 20-year bond fell from 4.00 to 3.85 percent, which means that all Treasury security maturity classes above two years pay less than four percent, but all classes 2 years and shorter pay more than that.

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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.