The 10 yr note auction was very good as the yield of 3.388% was below the when issued of 3.4-3.41% and the bid to cover of 3.30 was above the 12 month average of 3.09 and the best since April ’10. This solid auction comes notwithstanding commodity inflation that is continuing to ramp and follows all the news and stories coming out of Europe. With the help of Fed purchases, the 10 yr yield has been able to stay below 3.5% but one has to wonder with commodity inflation growing, economic growth recovering and no sign post Nov elections that spending cuts of substance will arise, that it has to be a short matter of time before yields head toward the 4% level which is only where it was last April.
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