30 yr bond auction very weak

The 30 yr bond auction was very weak. The yield was as much as 5 bps above the when issued and the bid to cover of 2.31 was the lowest since Nov ’09 and well below the 12 month average of 2.64. The 30 yr yield is at a 6 month high and is dragging the 10 yr yield to the highest in 2 months. Over the past few days there has been no question a change in the psychology in the US Treasury market, particularly on the longer end of the curve as the rise in commodity prices could only be ignored for so long notwithstanding the Fed’s increased buying power. Just have the visual of Bernanke & Co. trying to keep that beach ball called interest rates submerged under the water. This weakness in US Treasuries has shown up in soft trading today in high yield and emerging market bond debt and makes investors even more risk averse in their view of PIG debt (a pile on to their already difficult financial problems).

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