The record $16b 30 year bond auction was light as the yield was a few bps above where the when issued was trading and the bid to cover at 2.26 was the weakest since May and below the ’09 average of 2.43. Indirect bidders totaled 44% which is about in line with the ’09 average. Going out 30 years to collect a nominal yield of 4.47% with no inflation protection is taking huge faith that the return will compare favorably to other asset classes with the backdrop of the current impact of a weaker US$, higher gold, rising inflation expectations and worsening government finances. The long bond is lower following the auction but was on the weak side just ahead of it.
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