The toughest sale of the week for the US Treasury, debt going out 30 yrs without inflation protection with a yield barely above 3%, not too much higher than stated inflation, went well. The yield of 3.09% was well below the when issued of 3.11% and the bid to cover of 2.73 was above the previous 12 month avg of 2.64. Also, direct and indirect bidders took the most amount since Dec, leaving dealers with the balance. This auction also comes less than 2 months before Operation Smother the Yield Curve ends. Bottom line, whether its comfort with inflation in the midst of falling commodity prices, concerns with growth or desperation on the part of insurance companies and pension funds, who usually haunt the longer end of the curve, for any yield they can get, the US Treasury is certainly getting a bargain with selling such cheap paper. By selling more longer ended paper over the past year, the US Treasury has lengthened the average maturity of US marketable debt to almost 63 months as of yr end ’11 vs an average of 56 over the last 5 years and 59 months over the past 30 years. They still should be more aggressive in pushing it more years into the future to reduce the rollover risk as notwithstanding all the Fed’s wishes, rates won’t stay low forever.
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