At today’s $24 billion auction of U.S. Treasury 10-year notes, the morning’s demand for the safe haven of U.S. debt continued apace. In this morning’s bond trading, yields had fallen to 1.646% due to strong demand for the 10-year notes. At the 1:00 p.m. auction, the Treasury had to pay 1.675%, slightly higher than the rate on current bonds, but the lowest yield since July.
Today’s Treasury auction is just one of the tea leaves floating around after yesterday’s election. There had been some expectation that a Romney win would put an early end to the Federal Reserve’s latest round of easing, with the promise of pushing up interest rates. Whether that was possible or not is now moot, of course, but President Obama’s re-election appears to bond traders to have cast the easy money program into stone. That should have helped push up demand and yields on the 10-year notes. And that’s just what happened.
Demand at today’s auction was lower than the average of the past four auctions, at a bid-to-cover ratio of 2.59 compared with the recent average of 3.2.
Paul Ausick
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