The $21 bln reopened 10-yrs draw 3.9% with a record 3.72 cover and 43.1% indirect bidders. The market was rallying on the way into results with the market running to tag the 3.92% level. The yield was well under what was anticipated, meaning players were coming in more aggressively, willing to pay up whether they came in through the dealers or not, the direct bidders got a hefty 16.3%. The 10-yr has since swung to tip the 3.888% yield point.
There is understandably a great deal of fretting and nervousness regarding the US' overall debt situation. With a looming supply that is quite large there are a number of people who are arguing that interest rates are heading higher. In fact, it seems that the argument is not a matter of if but when.
However, notice that a4% yield is actually a pretty good yield in the current environment. The German 10 year is trading at 3.12%, the British 4 year is at 4.06, and the Australian 10-year is at 5.85%. So, 4% is actually a fairly attractive yield. In addition, the market took a major nosedive today, adding to the attractiveness of Treasuries.
