Treasury Yield Curve Remains Inverted

The Treasury auctions on Wednesday sold 17-week bills and 5-year notes. 

The 17-week accepted $33.69 billion of $95.76 billion tendered. The T/A of 2.84 was a hair lower than the 2.95 from last week and 2.91 from the week before. The median yield of 4.48 was the highest on any 17-week auction to date. Since the 17-week bill was first auctioned eleven weeks ago, there was no batch retired at today's auction.

The 5-year auction sold $43 billion at 3.905 percent median yield. With $105.39 billion tendered, this auction produced a T/A of 2.46. It is the second highest tender-accept ratio in 29 months. The yield is in line with the three previous auctions, which all hovered around the four-percent mark.

By retiring $38.4 billion, today's 5-year auction only slightly increased the debt under this maturity class. The yield on the matured batch was 2.19 percent; given the 3.905 percent at today's auction, the annualized cost of the U.S. debt increased by $838 million.

Since the 17-week auction did not retire any debt, its entire $1.509 billion added to the debt cost. In total, today's auctions raised the expected, annualized debt cost by $2.347 billlion.

So far this week, the debt cost has gone up by $7.407 billion.

The estimated, average interest rate on the U.S. debt is at this point 2.2 percent. This is up from 1.87 percent at the start of this fiscal year.

Secondary-market yields have moved recently in the direction of higher rates. Yields on shorter maturities remain elevated, while there is a weak but steady trend of rising rates on longer maturities. Specifically, the 20-year bond sold at 4.13 percent today, compared to 3.93 percent a week ago and 3.74 percent two weeks ago. 

The yield curve remains inverted, but has flattened somewhat:

Figure 1

Source: U.S. Treasury

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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.