Treasury auctions are coming under scrutiny for the latest signs of stress in the government bond market.
What Happened: The U.S. looks to raise higher levels of capital in fixed-income markets next year.
Yields spiked to 16-year highs in October as higher interest rates and the absence of some foreign buyers meant that primary dealers demanded lower prices — yields on bonds rise as prices fall — to fully cover Treasury auctions.
During one auction of $20 billion of 30-year notes in November primary dealers had to take up 18% of the supply. Typically, they would account for around 11% of sales.
This Week’s Auctions: On Monday, the Treasury auctioned $50 billion in three-year notes and $37 billion in 10-year notes. Primary dealers bought upwards of 17% of the supply.
It was probably of little consequence. The bid-to-cover ratios — a measure of demand — were good: at 2.54 on the 10-year bond, demand was solid and above November’s 2.45. A bid-to-cover ratio of above 2.4 is generally seen as ...