Stats on 30-Year Treasury Bond Auction… Tad Weak

The risk-on environment and the pressure to find yield elsewhere has probably not given much help for the success of the 30-Year Treasury Bond auction.  The yield went off at 3.24% for the 3.125% coupon against a prior 30-year yield of the ‘on-the-run’ yield of 3.23%.  The bid-to-cover ratio is down from the last ten auction average of 2.66 as this current bid-to-cover hit only 2.47.  That is not dismal, but it is not exactly a huge success.  At 3.24%, it is amazing that anyone buys them at all from a yield-investor’s point of view.

The indirect bids were 29.2% and the direct bids were 14.7% for the 3.125% coupon.  Some 98.13% of the bids were at the high. 

Here is the issue to consider.  At 3.24%, just multiple that out for 30 years for a rough estimate.  That implies only a total gain without the coupon being reinvested at only 97.2% on a pre-tax basis for the whole duration.  In 30-years you cannot even double your money, and that is before the tax man gets his share and before the monster of inflation eats at the return. 

JON C. OGG