Long-term bonds are tumbling and interest rates are spiking after a 30-year Treasury bond auction saw weak demand.
According to Bloomberg, 30-year Treasury bonds sold at a yield of 3.440%, which was much higher than the 3.392% expected by analysts.
The bid-to-cover ratio, a measure of demand, was low at 2.09. Analysts were looking for a ratio of closer to 2.36.
The results of the auction came out at 1:01 p.m. ET, which was when prices plunged.
Ironically, all of this comes just hours after Federal Reserve Chair Janet Yellen told the Senate Budget Committee that demand for Treasury securities remains strong.
“Interest rates are unlikely to begin rising until we are in a strong economic recovery,” she said.
The End Of The Bond Bull Market?
Long-term interest rates have been tumbling for most of the last 20 years. And since the financial crisis, the Federal Reserve has taken extraordinary measures to keep rates low in its efforts to stimulate the economy.
In the past year, however, the Fed has begun reigning in monetary policy a bit thanks to improving economic prospects. It’s currently tapering the rate at which it makes monthly purchases of Treasury securities and mortgage bonds.
More and more economists are now predicting that the 20 year old bull market in bonds may finally be ending.
Here’s a longer-term look at the 30-year bond yield via FRED.
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