All those folks calling for a Treasury selloff are seeing their prediction come true.
The latest note from Waverley Advisors tells the story:
With an anticipated $2.4 trillion total issuance on deck for this year (1.7 net of maturities),
the US Treasury market has become the obvious focal point for global risk capital.
Despite a staggering projected deficit and still weak overall economy, the recent concerns
about sovereign debt in Greece and other nations have helped extend the flow of money
based on the perceived quality of US, helping to sustain the low yield environment. Now
however, with faint tightening signals starting to emerge from the Fed, the speculative
opportunities presented by the yield curve are increasingly compelling.
In the game of deciding when, not if, yields will rise, yesterday was significant. The selloff
following the $25 billion 10 year auction was a clear indication of how volatile the mood
is among investors. The notes garnered 3.692, higher than forecast with a bid-to-cover of
2.67, driving yields higher in tandem with Chairman Bernanke’s vague testimony before
the house regarding future increases in the discount rate.
Today’s $16 billion 30 year auction also saw weakness, with a yield of 4.72% and a
bid to cover of 2.36 providing more data to confirm deteriorating demand.