Another day, another 8 basis points
Today, October 18, the yield on the 10-year Treasury rose to close at 4.91%. That was a gain in yield of another 8 basis points. The yield on the 10-year Treasury is up 61 basis points in the last month.
Please Watch My New YouTube Video: Trend of the Week Are We Looking at a Supply Crisis for Treasuries?
Today’s Trend of the Week is Are We Looking at a Supply Crisis for Treasuries? The federal deficit grew by $1.39 trillion in the first nine months of fiscal year 2023. That’s a huge addition to the deficit, an increase of 170% compared to the first nine months of 2022. The Treasury also recently increased its forecast for borrowing in the July-September quarter to another $1 trillion. This fast increase in the supply of Treasuries has been tough on the market. The Fed is trying to shrink its balance sheet and not buy as many new Treasuries. Private sector investors at auction are demanding a bigger discount. And because of the debt ceiling shutdown in new debt and the drawdown on the Treasury’s cash balances, the treasury has been issuing a lot of short-term bills to rebuild its buffer. Right now, however, Treasury is trying to move away from the short bills and looking to selling longer maturities. The market has little appetite for longer maturities as inflation seems to have staying power. Recent auctions on 7-20 year treasuries have been pretty weak. If you’re looking to buy 10-year Treasuries, look for an extra yield premium around 5% or so before the market is down dealling with as with this supply issue.
Saturday Night Quarterback (on a Sunday) says, For the week ahead expect…
Truthfully no one knows what’s going to happen as a result of the collapse of Silicon Valley Bank. Expect a lot of volatility, though, as the “smart money” tries to talk specific scenarios (watch out for shorts bearing expert commentary) and as the most likely scenario shifts from hour to hour.
CBO says federal government could default as early as July
The nonpartisan Congressional Budget Office warned, today, that the federal government would be at risk of a default as soon as July if lawmakers fail to raise the debt limit. The Treasury Department is currently using accounting gimmicks to keep paying federal obligations, after hitting the statutory debt ceiling last month. Treasury Secretary Janet Yellen signaled last month that those measures would enable Treasury to keep paying the government’s bills at least until early June. Today’s CBO estimate is, thus, an updated timeline.
Treasury has truly terrible, no good, bad auction day–that doesn’t help market mood
The stock market hates uncertainty. So with the control of Congress still undecided after yesterday’s election, the last thing investors needed was a shaky auction of 10-Year Treasuries today. But that’s exactly what financial markets got: One of the worst 10-year Treasury note auctions in years.
The U.S. is the Energizer Bunny of debt–It just keeps on borrowing
Here's one more macro trend to add to your list next to China trade war, Fed interest rates, and government shutdown. In 2019 the U.S. Treasury Department will maintain its sales of Treasuries at record levels near $1 trillion in new issuance for a second year in a...
Will a new kind of buyer push Treasury yields higher?
Our regular (or occasional or perhaps occasionally regular) Friday series (actually running on Sunday this week) Trick or Trend looks at what might (or might not) be emerging investible trends. Exclusively on JAM. This post won't run anywhere else. Ever. The character...Download Jim’s eBook for Free
