No One Wants Treasury Long Bonds

The United States’ insatiable demand to borrow is still facing hurdles over whether new buyers want to buy longer-date maturities.  Sure, our short-term bills are fine, but as you go farther out the curve, the demand to loan the government money for 30-years is much smaller.  Today marked the $13 billion Long Bond auction for the 29-Year and 11-month maturity due in November 2039.  Based on the tone, you can imagine that it was not well received.  CNBC’s Rick Santelli is a vocal figure enough of the time without us pointing him out, but he gave the auction an “F” for a report card grade.

The 4 3/8% coupon went off at a price of $97.6276 for a 4.52% yield versus a 4.49% yield prior.. .  The bid-to-cover ratio was 2.45, under prior re-openings.

The direct bidder figures, Non-Primary dealer submitters bidding for their own house accounts, was only $902 million accepted, and Primary Dealer for the own house accounts was over $6.866 billion. Indirect Bidder figures,  Customers placing competitive bids through a direct submitter (includes foreign and international monetary authorities) were $5,213,407 billion. Awards through Treasury Direct were $2.3695 billion.

If (ergo when) Long Bond rates are closer to 5% next year after the FOMC finally starts raising short-term rates in a game of catch up, you might expect better auction results.  At least that has been the case historically as each new percentage handle is hit.

JON C. OGG