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business newsThe Real Reason the 30-Year Bond Auction Wasn't Pretty
Contrary to what some sources suggest, US initial jobless claims data should have had little impact as it is still well above normal levels.
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Notice the spike in rates when the auction results were announced.
According to Bloomberg:
Treasury 30-year bonds extended losses after an unexpected drop in U.S. initial jobless claims sapped demand at the $16 billion offering of the debt. The first auction of the securities since Standard & Poor’s cut the U.S. credit rating on Aug. 5 produced a yield of 3.750 percent, compared with the average forecast of 3.622 percent in a Bloomberg News survey of eight primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount offered, was 2.08, compared with an average of 2.64 at the past 10 sales.
I disagree with the commentary from Bloomberg. The claims data should have had little impact as it is still well above normal levels. In addition, economic reports have shown a deteriorating global economic condition. So, it is better to look the truth squarely in the eye: The U.S. has too much debt outstanding and the safer play is to pick up shorter maturities.
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