10-Year Treasury Auction Signals Strong Fear of Global Recession

Investors are treating U.S. Treasury debt more favorably than gold at the moment.  The U.S. just saw its “AAA” rating from Fitch maintained late on Tuesday and now we are reminded why the research report called the United States the world’s reserve currency again.  The 10-Year Treasury Note auction from today is getting extremely high marks. Unfortunately, the implications are not good for the broader economy.

The prior ‘on-the-run” 10-Year was trading at 1.51% or so today, but the new auction went off at an amazing 1.459%.  The bid-to-cover ratio was extremely high all the way up at 3.61% versus an average of 3.07 for 10-Year Treasuries.  Another key metric was indirect 40.6% and direct bids were over 45%, which is the highest direct bidding we have seen.

Keep in mind that the previous 10-Year Treasury auction went off at about 1.62% with a bid-to-cover ratio of only 3.06 at the time.  This is fear of a global recession driving interest in U.S. Treasury debt.  The good news is that you can qualify for a housing mortgage then you are likely looking at record-low rates on 15-year and 30-year mortgages.

The iShares Barclays 20+ Year Treasury Bond (NYSEMKT: TLT) exchange-traded product is now up 0.23% at $128.74 on the news.  Also the iShares Barclays 7-10 Year Treasury (NYSEMKT: IEF) exchange-traded product is up by $0.07 at $109.09.  Even the PIMCO Total Return ETF (NYSEMKT: BOND) ticked back up and is trading up $0.07 at $106.53.

JON C. OGG