$28 billion 7-yr Note Auction Amid Lukewarm Demand

The U.S. Treasury market is on its back foot today. The stars are aligned against it. Equities are posting strong gains. Recent string of economic data has been consistent with the end-of-recession story. There has been record supply hitting this week and today's 7-year note sale complete the week's operations. Demand in the 2-year and 5-year note sales on Tuesday and Wednesday saw relatively weak demand, especially from the indirect bidders. Indirect bidders took up about a third of the 2 year and a little more of yesterday's 5-year note sale Last month indirect bidders took down closer to two-thirds of the supply.

One important comparative point to make is that there are sufficient participants at the U.S. auctions, thus far. However, the UK, Germany, and China (at least twice) failed to sell their complete amount. Next week will be lighter supply, but in the week of August 10, the U.S. will sell 3 and 10 year notes and 30 year bonds.

Through this week the U.S. has issued a little more $1 trillion of debt this year. Meanwhile the Fed has bought about $223 billion worth of Treasuries since late March. Note also that the somewhat better economic numbers being seen suggest that the U.S. borrowing needs this year and next may not be quite as great as previously thought. We have seen at least one investment house revise lower--by more than 25%--its projected U.S. borrowing needs and would not be surprised if some other come around as well.
$28 billion 7-yr Note Auction Amid Lukewarm Demand $28 billion 7-yr Note Auction Amid Lukewarm Demand Reviewed by magonomics on July 30, 2009 Rating: 5
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