Friday, February 11, 2005

Well, what must the neighbors be thinking of the US now?
US Treasury bond prices fell and yields rose on Thursday as investors booked profits ahead of an auction of $14bn in 10-year paper and sold more following unexpectedly weak demand for the new notes.

The auction attracted bids worth 2.05 times the paper on offer, lower than the 2.31 average of the last 10 sales. Indirect bidders, which include foreign central banks, took 28.5 per cent of the offering, below the 31.5 per cent average of recent auctions and well below the 45 per cent taken during sales of three- and five-year paper earlier in the week.

�This auction has to be seen as disappointing,� said Brian Robinson at 4Cast economic consultancy, who noted two of the the three notes sold this week were now trading below their issue price.
As Gary Pollack of Deutsche Bank Private Wealth Management says over at Bloomberg, "There's very little incentive to keep buying Treasuries", and thus when the central banks of the world lose their appetite, the major buyer of these clunkers disappears, too.

Of course, this is hardly reason to fear that East Asia is about to jump the dollar ship. Central banks turned out well for the five-year bond auction earlier in the week, and with the broad dollar at its highest since mid-November, there is little reason for the PBOC, BOJ and the rest to belly up to this bar.

Still, key your eye on these auctions. And the number of bank robberies (so says JackNYC). Two good leading indicators of the real state of the economy.

UPDATE: has a nice chart showing indirect bidder participation in 10-year treasury bill auctions since August 2003. A clear upward trend peaking in mid-2004, then a very erratic but secular and rather steep decline since that time.


Post a Comment

<< Home