Follow The Money In the Treasury Auctions

There’s always a treasury auction around the next corner with America's propensity to deficit spend. Watch not only demand (bid-to-cover) but also who's participating. One day probably in the not too distant future an auction will be held and no buyers will show up. This is what happened in the most recent New Jersey municipal bond auction. Lackluster interest caused prices to fall and the size of the offering to shrink substantially.

Headline: New Jersey Agency Shrinks $1.2 Billion Debt Sale By 40%

A New Jersey agency shrank the size of a $1.2 billion refinancing offering by roughly 40% and hiked yields on the sale as it struggled to market the bonds to institutional investors Thursday.

A term sheet with preliminary pricing for the deal showed the agency--the New Jersey Economic Development Authority--sliced the size of an originally $1.2 billion sale to roughly $712 million Thursday.

Source: online.wsj.com

Headline: Treasuries Snap Rally as U.S. Prepares to Auction Five-, Seven-Year Notes

Treasuries fell following gains yesterday that pushed the 10-year yield down the most in eight months as the U.S. prepared to sell $35 billion of five-year notes today and $29 billion of seven-year debt tomorrow.

The difference between yields on two-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, widened to as much as 2.14 percentage points, the widest in 31 months. The spread expanded as oil costs climbed on violence in Libya and signs of growth in the U.S. economy.

“With the five-years and the seven-years still coming up, the market doesn’t really want to break a lot lower than this” in yield terms, said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. “There is a safe-haven bid but the big issue that’s there in the background is: do Treasuries offer a return that is attractive to investors? Not yet,” he said.

Source: finance.yahoo.com
Source: treasurydirect.gov