This morning’s 2% rally is over, and now indices are down around 1%.
One theory: After the UK held an unsuccessful auction for 40-year bonds, we had a weak one as well today.
We managed to sell our desired $34 billion in five-year notes, but the yield of 1.849% was higher than the 1.801% that analysts were expecting.
Given how big the debt is set to get, and the assumptiont that it could be easily financed due to the flight to quality, there’s fear that this is just the beginning of higher rates.
Prediction: The expected analyst-consensus yield on government auctions will be frequently cited by talking heads on TV from now on– sort of the same way everyone started talking about the TED spread last year, as if everyone was supposed to follow that now. And every time the yield comes in heavy, it’ll be big news.