U.S. Treasury debt prices fell this afternoon after a weak auction of 10-year notes, sending 30-year bonds down a point on the day.
The auction, the second of three this week that will total $74 billion, was weak on all measures of demand. This is going to make Thursday's scheduled sale of 30-year long bonds interesting.
As I understand it, in the relatively early phase of a deflationary environment long bond yields fall - I'm guessing due to low expectations for future interest rates.
ReplyDeleteIf all signposts point to the US entering a deflationary environment, then what gives with today's auction? Just a blip in a larger trend?
Deflation means less money around especially in the capital goods sector, other that a flight to quality for a brief period, interest rates go up (Subject of course to Fed manipulations).
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