2 yr auction mixed but buyers still not scared

The 2 yr note auction was mixed as the yield was right in line with the when issued but the bid to cover of 3.14 was below the 12 month average of 3.36. Direct and indirect bidders took 48% of the auction, a touch above the 46% average of the previous 12 months. The results come just minutes after White House spokesman Carney added another word to the debt ceiling lexicon saying a US default would be “cataclysmic” to the economy. There is a difference however between a default caused by not raising the debt ceiling, which is just technical in nature, and one where an entity can not pay back a loan due to a lack of money. The US has a printing press, therefore will never default outside of a Congressional technicality and currency debasement. Bottom line, buyers of today’s auction and Treasuries in general across the yield curve are not bothered by the political noise, just annoyed with having to hear about it instead.

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