Interest Rate Roundup

Thursday, March 29, 2007

Five-year auction flop, inflation thoughts, and more

Today isn't a very busy day on the economic front. It turns out that GDP growth was a little stronger than originally thought in Q4 (2.5% vs. 2.2%). Jobless claims were also down more than expected. But neither data point is that big of a deal. What I'm paying more attention to is ...

* The pathetic 5-year Treasury Note auction we just had. Treasury just tried to move $13 billion of these puppies. But it had to sell them at a yield of 4.535%, worse than pre-market forecasts of 4.52%.

Moreover, only 16.7% of those notes were sold to indirect bidders, a category that's considered a proxy for foreign central banks. That was down from 26.5% a month earlier and the worst reading since all the way back in June 2003. The bid-to-cover ratio also slumped to 2.14 from 2.43 at the last sale. That was the lowest reading for this measure of demand since October.

* Could it be that bond traders, unlike Ben Bernanke of "What me, worry about inflation?" fame, are concerned about pricing pressures? I think so.

* Speaking of inflation, anyone see that crude oil futures are up almost $2 to $65.83 ... the highest level since September? Or that the 10-year TIPS spread is up again to 246 basis points? Or that long bonds have fallen in price for 10 out of the past 12 sessions?


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