Well, it’s not quite as epic as Wednesday’s gilt failure but the US Treasury’s record $34bn five-year auction was met with rather subdued demand late yesterday.
In fact, the Fed had to offer a higher yield to attract buyers — 1.849 per cent instead of the 1.801 per cent expected.
The yield on the benchmark 10-year now looks like this.
When the Fed made the March 18th announcement that it would start buying Treasuries as part of its QE efforts to flatten the yield curve and lower rates, the 10-year yield crashed from around 3 per cent to under 2.6 per cent. That’s now creeping back up, having risen to circa 2.78 per cent yesterday after its biggest single-day gain in two weeks. Not exactly what the Fed had in mind then.
The Fed auctions off $24bn of seven-year notes today, Thursday. That will certainly be something to watch. Just as a reminder, the US plans to sell a record $1.4 trillion of debt this year – and that’s net of the $300bn it plans to purchase via QE.
Related links:
Fed to start QEasing today, should we be VaRy worried? – FT Alphaville
Swinging gilts – FT Alphaville
Gilt auction failure begins – FT Alphaville