So we noted earlier this week that the US Govt was bringing $300+ billion to market which included the 10s and 30s new issuance. Well both auctions went terrible, in fact the US 30Y auction came with the largest tail in its history highlighted by a massive 5.3bp whopper tail. Foreign indirect bidders dropped a huge 5% from the prior auction and dealers were stuck with swallowing the bulk of the load. As expected yields jumped a massive 10 basis points:
This certainly reinforces our belief that for now the US govt has lost their risk free status and the global investment community is requiring higher rates to accept this new debt. We keep hearing that the positive term premium is a welcomed signal yet, there is nothing positive about a 4.75% coupon going miserably! The US government has a spending problem and they are paying for it in higher and higher rates!
Word on the street that the massive Chinese bank ICBC went offline and this was the cause of the disruption, yes, ICBC is massive…
