Tuesday, November 09, 2004

We here at the Globblog have been talking a lot about the $51bn in debt the US Treasury is selling this week. Will private capital turn out? Will the Bank of Japan eat it all? How high will rates go in order to unload the stuff? Well, we've had one day under our belt. What's the news?
The Treasury auctioned $22 billion in three-year notes yesterday at a 3.09 percent yield. . . .

At yesterday's sale of three-year notes, investors bid for 2.24 times the amount of available securities, compared with 2.02 in August. So-called indirect bidders, a group that includes foreign central banks, bought 53.6 percent of the debt, up from 36.5 percent.

``The key to Treasury demand will be the amount of indirect bidding on the part of Asian central banks, and I believe that will remain strong'' as they invest proceeds from currency sales, said Grant Hassell, who helps manage the equivalent of about $2.2 billion of fixed-interest investments at AMP Capital Investors New Zealand Ltd. in Wellington.
So it appears that demand is indeed robust and that Asian central banks are playing their customary role as debt consumers of first resort. Private foreign capital continues to look on coolly. All but $3bn of the $51bn in debt sold this week is going simply to pay off maturing securities. At first glance it seems that private capital is taking the money and running.

Finally, on Thursday of last week the yield on the three-year note was 2.89%, 20 basis points lower than at yesterday's auction. 3.09% is the highest level since late July.

Another $15bn today and then $14bn tomorrow. And then sometime before November 18 the Republicans plan to jack up the debt ceiling another $690bn. Wow, before you know it we might actually be talking real money.

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