The first government bond bid of the US this month, which attracted great attention from investors, was successfully carried out on the 9th (local time). If demand from institutional investors is sluggish, the yield of government bonds (interest rates) surged again, which was expected to put a burden on the stock markets in major countries, but all of them were digested amid fierce competition.
With the US Treasury Department scheduled to issue a total of $120 billion worth of government bonds this week, the average bid rate for the first 3-year government bond (worth $58 billion) reached 2.69 times. It is above the average of last month (2.39 times). The issue rate was on average 0.355% per year.
It is evaluated that the price of the bonds increased as institutional investors participated in the bidding competitively to buy government bonds, and the issue rate was set relatively low. It is an analysis that the number of institutions trying to invest in government bonds has increased again as the interest rate of government bonds has risen sharply in recent years. Auction Economics diagnosed that “the demand for 3-year Treasury bonds revived, which instilled a sense of relief in the entire market.”
In the US bond market, the circulating yield of long-term government bonds has stabilized. On this day, the 10-year interest rate was 1.55% per year, down 0.04 percentage points from the previous day. The 20-year maturity is 2.16% per year, a 0.04 percentage point, and the 30-year maturity is 2.26% per annum, a drop of 0.05 percentage points. Short-term interest rates for 1-month to 1-year periods remained unchanged or rebounded slightly compared to the previous day.
Earlier, the Ministry of Finance issued a $62 billion worth of 7-year government bonds on the 25th of last month. As institutional demand was confirmed to be sluggish, most bond prices fell and interest rates surged. The yield of 10-year US Treasury bonds soared to 1.6% per year, the highest level in a year or so on the same day.
Interest is also focused on the results of bidding for government bonds with different maturities. Following the bidding for 10-year government bonds (worth $38 billion) on the 10th, a bid for 30-year government bonds ($24 billion) will be held on the 11th. Winnie Caesar, head of credit strategy division at Wells Fargo, said, “The problem is that the largest volume of government bonds has been pouring out since World War II (due to economic stimulus). As long-term yields are directly linked to corporate and household loan rates, the US economy “Edo is a major variable.”
In the event that long-term government bond bids fail to hit the box office and government bond yields rise again, it is observed that market intervention measures will be reviewed at the regular meeting of the Federal Open Market Committee (FOMC) of the US Central Bank (Fed) scheduled for 16-17. Market intervention measures include operation twist, yield curve management, and extension of banking capital deregulation.
New York = Correspondent Jae-Gil Cho [email protected]
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