10 yr auction decent, helped by back up in rates

The 10 yr auction was decent. The yield of 4.347% was a hair under the when issued of 4.35%. The bid to cover of 2.58 was above the 12 month average of 2.51. And, the number of direct and indirect bidders totaling 85% was around the one year average.

Bottom line, the back in yields today to back above 4.30% likely helped the auction in terms of providing a better yield. Regardless of who wins today, there is no stopping the massive Treasury supply that continues to flood us and after 40 years of people complaining about rising debts and deficits and it never mattering, I do thing now it does. I look at the price of gold and I’m reinforced by what is happening in the UK gilt market as the sovereign debt challenges are global. Yes, inflation and economic trends are obviously an influence on yields but so are the laws of supply and demand. And we still have to think about the possibility that if the economy rolls over which would imply a rally in long rates if we use the historical playbook, the US debts/deficits would get even worse and maybe long rates rise instead. If the case, that’s something you only see in emerging markets.