Source: Zhitong Finance
Although US bond auctions on Tuesday and Wednesday showed that investor demand is fair, investors may be reluctant to buy longer-term US bonds a few days before the US Treasury is about to announce quarterly refinancing plans and the Federal Reserve meets.
The US Treasury Department has auctioned treasury bonds totaling about 140 billion US dollars in the past two days. Specifically, the US Treasury Department auctioned 69 billion US dollars of two-year US bonds on Tuesday. The bid interest rate was 4.898%, slightly lower than the 4.904% forecast before the auction, indicating that this auction was more popular than expected. In addition, the US Treasury also auctioned off 70 billion US dollars of five-year US bonds on Wednesday. The size of this auction increased by 3 billion US dollars from 67 billion US dollars last month, the highest amount of US bonds for this period since records were recorded. The bid interest rate for this auction was 4.659%, a sharp increase from 4.235% last month, and slightly higher than the expected yield before the auction, indicating that demand was not strong.
The US Treasury will also auction $44 billion of seven-year US bonds on Thursday. Although US bond auctions on Tuesday and Wednesday showed that investor demand is fair, investors may be reluctant to buy longer-term US bonds a few days before the US Treasury is about to announce quarterly refinancing plans and the Federal Reserve meets.
Gregory Faranello, head of US interest rate trading and strategy at AmeriVet Securities, said, “Changes in the position of the Federal Reserve, increased market volatility, and increased financing requirements from the Treasury will make the future auction environment more difficult.”
This week's large supply of US bonds is expected to help confirm whether this is a turning point for the US bond market, which has been declining for four consecutive weeks. This round of decline once pushed two-year US Treasury yields past the 5% mark. Some people think this level is very attractive to bond managers seeking to invest capital into short-term bonds. However, George Catrambone, head of DWS's American fixed income division, said, “For me, the only notable aspect is still the huge amount of bonds.”
Traders have been cutting their expectations for the number of times the Fed will cut interest rates for some time, due to a series of strong economic data and inflationary stickiness. Investors are waiting for the US GDP data for the first quarter to be released on Thursday and the US PCE price index for March to be released on Friday. These data may help shape expectations about the Federal Reserve's policy path.