The reopening of the Nov 10 yr note auction was on the weak side as the yield was about 4.5 bps above the when issued and the bid to cover, while in line with the average seen this year, is the smallest since Aug at 2.62. Also, 32.9% going to indirect bidders is below the average of the prior 6 at 45.6% and the smallest of them. Ahead of this auction and in light of the sovereign credit rating agency news from Dubai, Greece and Spain this week, the 5 yr CDS in the US today is at 35 bps, the highest since July. The UK 5 yr CDS as a comp is up 8 bps today to 84, the highest since June. Tomorrow the Treasury comes to market with the 30 yr bond and will be even a tougher sell than today’s benchmark 10 yr because of its length and lack of inflation protection.

Category: MacroNotes

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5 Responses to “10 year note auction weak”

  1. says:

    The foreigners just flipped Timmy and soon to be Jamie D. Lucifer the middle finger. Who can blame them. Borrow 10 billion today at 3.x % and get 10 billion back when it is worth 10 cents in USD denominated paper that is nothing more than Ben’s QE-art.

  2. Pat G. says:

    Soon, everything will be five years or less. Constantly rolling that over ought to be fun.. Note to Obama: The world is getting tired of financing our lifestyle.

  3. Simon says:

    If Richard Koo (Japan Finance Minister) is to be believed increased domestic savings will more than cover Government deficit requirements. It is just up to the Government to fill the GDP gap left by the savers to prevent a tailspin into a deflationary depression. Of course if the whole world is on the verge of a deflationary depression things might get a little tricky. I mean things do not appear to be panning out all that well for the Japanese in as much as that even though corporate balance sheets have been substancialy repaired the government’s sheet is now horrendous. In addition it is possible that hoped for increased tax revenues from now a now well capitalized private sector will not eventuate because the great western consumer is no longer buying.

    All I see is a race to the bottom for fiat currency.

    At least I think I know what I’m talking about…maybe.

  4. rleberenz says:

    So far the moves in all assets, even Treasuries, have been a result of a dollar strengthening but this auction was a sign that money isn’t going to be coming straight out of equities and into bonds, treasury backed or not.

    The Fed ended it’s policy to buy up long term debt from the Treasury, so this extra spending proposed by the Dems and the price tage on Health Care reform, which will prob get forced through, will not be ignored by investors planning to get into bed with Uncle Sam for the next 10 to 30 years.

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