The record 5 yr $42b auction was excellent as the yield was 3-4 bps below the when issued and the bid to cover at 2.81 was the best since Sept ’07 and well above the average seen this year of 2.28. Indirect bidders totaled a solid 60.9%, above the average of 51.1% over the past 5. Whether its due to year end buying and prettying up of balance sheets, or still economic concerns, or still apparent risk aversion, or bank buying taking advantage of free money from the Fed, or foreign central bank FX intervention of buying US$s to halt the rise in their respective currency or lack of belief in inflation or confidence that the Fed will remain easy for much longer, the US Treasury has been able to finance every growing deficits with continued relative ease. Tim Geithner can continue to say “Wait’ll Otis (China and others) Sees Us, He loves Us” before every auction, until he can’t.
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