The 30 yr bond auction was poor. The yield was almost 5 bps above the when issued and the bid to cover of 2.40 was below the 12 month avg of 2.65 and the 2nd weakest since Nov ’10. Also, dealers got stuck with the 3rd biggest % amount of the year with less going to direct and indirect bidders. Today’s auction follows the weak 10 yr yesterday and is a sign of some market pushback to these historically low interest rates. Bernanke said today that “inflation likely to stay close to 2% or less.” Maybe the bond market disagrees with this forecast as the last CPI reading was closer to 4%. Also, the other dynamic that 10 yr and 30 yr maturities will capture is the fiscal health of the US government with the Super Duper Deep Undercover Secret Committee in DC just weeks away from unveiling their compromise or lack thereof in the midst of our entitlement state reaching a breaking point over the next decade plus.
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