Treasury prices had firmed in recent days, taking the yield of the 10-Year Treasury note further away from breaking back above the 2.0% mark. Now a new 10-year auction has been held by the Treasury and the result was not exactly good. It was not awful, but we would say “less bad than good.”

Today’s $21 billion auction sold at 1.863%, and the bid-to-cover ratio was 2.83 (down from closer to 3.0 in recent auctions). Perhaps the disappointment was tied to direct bidders buying only 14.8% of the deal. That had been running at about 22% of late. Indirect bidders were also a disappointment with them only buying 28.5% of the deal rather than almost 38% for a recent average.

We might not care about an off-color auction but the Treasury patterns were making a serious rise in yields up until this week. Today’s auction also likely sets a soft tone for Thursday’s 30-Year Treasury Bond auction.

After having conducted 264 public auctions in 2012, the Treasury issued a total of about $7.9 trillion in debt securities in 2012. Some of that was rollover debt of course, but it is getting easier and easier to see just how this debt is on the path of getting out of control. Imagine what happens to our debt servicing costs if rates rise just 100 basis points.

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