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Tuesday, December 28, 2010

5-Year Treasury Note Auction "A Stinker"

Bill Gross, founder and co-chief investment officer, of bond fund giant PIMCO called today's auction of 5-year Treasury notes "a stinker"." And that it was. Bloomberg's report:

A huge five-basis-point tail mars December's $35 billion 5-year note auction. The high yield of 2.149 percent compares with a 2.102 percent when-issued yield at the 1:00 bidding deadline. Non-dealer participation wasn't quite as soft as yesterday's 2-year auction with the group awarded 42 percent vs a 45 percent average. This week's Treasury's auctions are definitely showing the effects of thin holiday conditions. The Treasury auctions $29 billion of 7-year notes tomorrow.

Notice that there is a 7-year note auction tomorrow. Today's market pushed the benchmark 10-year Treasury yield up almost 15 basis points to 3.48%.

Previous post: how to follow Treasury Auctions.


  1. Saw this on CNBC last week---- U.S. Treasurys should be cut to 'junk' status by ratings agencies, says Peter Morici, professor at Robert H. Smith School of Business, following the extension of the Bush-era tax cuts (Morici is given to making bold, sweeping statements, but maybe there is some truth in what he is saying.

    I've been thinking for quite a while that the world is going to lose it's appetite for US debt sometime in the future. Maybe that sea-change is starting.

  2. re: Grouch It will be interesting to watch. CNBC attributed it to light demand because of the holidays. They noted it was a bad week for the Treasury to have to come in and raise $100 billion but with the deficit the way it is there is no choice. It is just non stop. It has been saved so far by the PIIGS troubles and fears of deflation.
    Even with this backup there will be some eyebrows raised when people open their year-end statements.
    Stay tuned.