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Treasury Sales (Not) Weak On Debt Worries

From the Wall Street Journal’s MarketWatch:

Weak debt auctions highlight investor worries

Weak auctions highlight uncertainty about U.S. debt issues.

By Sara Sjølin, MarketWatch
July 28, 2011

NEW YORK (MarketWatch) — The latest round of Treasury auctions ended Thursday with a sale of 7-year notes that showed weak demand from investors, underlining investor worries as the Aug. 2 deadline for raising the U.S. debt ceiling approaches

Meanwhile, the same Treasury auction, as reported by Reuters:

Mixed demand greets last pre-Aug.2 U.S. bond auction

Seven-year auction mixed but no disaster

By Burton Frierson
Thu Jul 28, 2011

NEW YORK, July 28 (Reuters) – The U.S. Treasury drew mixed demand on Thursday at its $29 billion offering of seven-year notes, the last auction of bonds before the government’s Aug. 2 deadline to raise the national debt limit.

The sale brings to a close this week’s $99 billion worth of bond offerings. The auctions were lackluster but by no means a disaster that would suggest investors are fleeing Treasuries over worries the government could default next week

Foreign interest was below recent averages but much improved from last month’s sale

"You look at the balance of the auction and it’s on the weak side like last month. It reflects some jitters ahead of the Aug. 2 deadline, but the Treasuries market is taking the supply in stride," said Anthony Valeri, fixed income strategist with LPL Financial in San Diego…

Finally, the same auction as reported by the Agence France-Presse:

Treasury auction smooth despite default fear

(AFP) – July 29, 2011

WASHINGTON — A US Treasury auction of $29 billion in new debt went off smoothly Thursday despite the deadlocked battle over raising the country’s debt ceiling to avoid a potentially disastrous default.

The sale of seven-year notes saw fairly strong demand and they sold carrying an interest rate of 2.250 percent, better for the government than previous seven-year bond auctions in June and May, which both carried rates of 2.375 percent.

The auction underscored the lack of any visible panic so far among buyers of US Treasuries as the August 2 deadline for raising the debt cap nears

Are we reading this right? Did this auction actually go off better than the previous auctions in June and May, before there was any fear about the debt ceiling not being raised? In any case, it’s clear it wasn’t the disaster than so many were predicting.

It’s almost as if the news media decided to throw a ‘default Apocalypse’ party — and nobody came.

This article was posted by Steve on Friday, July 29th, 2011. Comments are currently closed.

2 Responses to “Treasury Sales (Not) Weak On Debt Worries”

  1. proreason says:

    One of my interests is baseball statistics. One of the key things about baseball that few people understand is that the game changes over time, and that evaluating a players value has to be put in the context of the era.

    For example, in 1920 the game changed dramatically, going from the dead ball era to the live ball era. It wasn’t that the ball changed. The key differences were that prior to 1920, balls were left in the game unless lost (foul balls were even thrown back into play), and pitchers were allowed to manipulate the ball. By the end of a game the ball was so hard to see, had been so mushed up, and had been spit on and marked up so much that getting a hit was a near miracle. After 1920, new balls were put in play whenever a ball was mashed or marked, and pitchers were forbidden from scarring them or spitting on them. Consequently, scoring in the 10 years after 1920 was about 25% higher than before that watershed. (eventually, by the way, pitchers learned how to adjust and scoring descended again). And that is by no means the only example of a dramatic change in the game. Night baseball is another one. Scoring dropped significantly as night baseball was introduced, because the ball is harder to see in unnatural light.

    So comparing the skill of a player from 1916 can only be done in light of the dramatic change from the live ball era. A run produced in 1916 is about 25% more valuable than a run produced in 1924. You get the idea.

    So, let’s think about this bond auction. Shockingly, apparently, the interest rate went down in the latest auction, despite the crises on the horizon where the US will default on its debt and the economic universe will collapse. But a lower interest rate for Treasury securities means that people this month want to buy US debt even MORE than the prior months. Somehow, even though we are assured that the US is about to collapse, people want our bonds now even more than before.

    Could it be that despite our economic problems, the problems elsewhere are even worse? And that people still view the US as the safe haven for their money? Despite what the smartest man to even lives says about it?

    Everything, including baseball and government bonds, is realative you see. Even the Marxist in Chief hasn’t convinced the world yet that the US is just another country.

  2. Reality Bytes says:

    Nothing New in Raising the Debt Limit

    From the psudo intellectual Do Do’s @ CBS Marketwatch


    Take a look at the debt to GDP charts. They include historical ratios too so you can see why Ike & Ronaldus Maximus were justified in raising the debt limit; AT 25-55% WERE GOOD FOR IT.

    At 90 – 120% it’s time to call in Congress’ credit. Oh wait! They don’t have any. They just take ours!


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