The U.S. Treasury auctioned $32 billion in three-year note today at a yield of 0.392%. Demand was down, from a four-auction average of 3.73 times the amount sold to 3.41 times. As a result, the yield was the highest since April.

We noted earlier today that there has been some significant movement on what are normally thought of as inflation trades. Gold and silver are both up, crude oil is up, even natural gas is trading higher.

But if demand for Treasuries is lower, what do we make of that in conjunction with today’s price movements? If Treasury yields are rising, that would seem to indicate that investors and traders prefer equities, and today is a risk-on kind of day.

And how are equities doing? The DJIA is up about 1%, the S&P 500 is up about 1.2%, and the Nasdaq is up about 0.6%. Not exactly a bull-run, but positive.

So, what and who are traders betting on in the presidential race? Inflation or risk, Obama or Romney?

Paul Ausick

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