Treasury debt deluge capitalizes on Fed easing outlook
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Dollar up; gold, crude slide; bitcoin down ~5%
10-year U.S. Treasury yield steady ~3.83%
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TREASURY DEBT DELUGE CAPITALIZES ON FED EASING OUTLOOK
It looks like the Treasury is finessing the Fed's glide path to lowering interest rates starting next month as it sells a whopping amount of Treasury securities this week to finance federal government operations and the budget deficit.
On the block on Wednesday is $70 billion in five-year notes, a near record-size auction that comes on the heels of Tuesday's well received sale of $69 billion in two-year notes that matched the record sale of that maturity in July. Up on Thursday are $44 billion in seven-year Treasury notes.
As Reuters columnist Mike Dolan points out, almost three-quarters of this week's deluge is in bills, which mature in 12 months or less, and these will roll over at progressively lower rates if U.S. interest rates decline as expected.
"By front-loading the maturity profile of the debt, the Treasury is revealing one of its main tools to circumvent a debt crunch over the coming year or more," Dolan said in his opinion piece.
FHN Financial macro strategist Will Campernolle said in a note on Wednesday that the five- and seven-year sales could cause market moves, given an otherwise quiet calendar until Friday's Personal Consumption Expenditures price index release.
Demand at Tuesday's two-year auction was strong, with buyers accepting a yield below where the when-issued were trading at the deadline for bids.
"Yesterday’s 2-year Treasury auction stopped through by 0.6bp, helping solidify richer valuations in the belly of the curve after Powell’s Jackson Hole speech," Campernolle wrote. "Light August trading volumes and some directionless price action in recent days had presented the possibility that yesterday’s auction would re-calibrate yields in new ranges. Instead, intermediate yields continue to move horizontally from the post-Powell rally in the lead up to Friday’s PCE."
(Alden Bentley)
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FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:
RETAIL TRADERS BULLISH, BIG MONEY CAUTIOUS AHEAD OF NVIDIA RESULTS CLICK HERE
MORTGAGE RATES DIP FURTHER; SOME BORROWERS BITE CLICK HERE
INVESTORS STAND PAT ON NVIDIA DAY CLICK HERE
BUYING OPPORTUNITIES IN EUROPEAN BANK SHARES CLICK HERE
CONSENSUS IS FOR GOOD Q3 EUROPEAN EARNINGS BUT BAD Q4 CLICK HERE
DOLLAR CLOSE TO FAIR VALUE FOR THE FIRST TIME SINCE MARCH 2024 - BOFA CLICK HERE
INSURERS IN FOCUS CLICK HERE
NUDGING UP BEFORE THE BIG RESULTS CLICK HERE
MARKET HELD IN THRALL AHEAD OF NVIDIA NUMBERSCLICK HERE
Mortgage demand https://reut.rs/3yY9SoE
Housing stocks https://reut.rs/3T9tsVD
Apollo chart on US debt servicing costs as a share of govt outlays https://tmsnrt.rs/471XIYo
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