We might see a little drop in rates….
by Tom on June 11, 2009
in Market Musings, Mortgage Rate Updates
There was an auction of 30 year Treasury bonds today with a couple of interesting results:
- There were more bidders than expected.
- The percentage of the total that was bought by foreign countries was higher than previous auctions – at least for now they aren’t abandoning the Treasury market.
- But the rate that they went for was the highest in the last three years.
So, what do I expect that means? It’s sort of like a tea kettle that’s building up pressure and then you lift the lid a bit. It lets some pressure off.
Does that mean we’re going to see a significant drop in rates? Nope, but it just might provide a bit of a “pause” to the rate pressures.
For at least 5 minutes.
Tom Vanderwell
Breakingviews.com – For the Treasury, a Reprieve in the Bond Market – NYTimes.com
The United States Treasury bond market has been feeling distinctly unloved. A 10-year bond auction went badly on June 10 after Russia, Brazil and China said they were taking steps to diversify their foreign currency reserves. Worries that the $11 billion auction of 30-year bonds on Thursday would follow suit rattled the market. But central banks flocked to buy the bonds, meaning dollar diversification fears were overblown for now.Nonetheless, the 30-year bond auction attracted more interest than usual. The ratio of total bids to accepted bids, an indicator of demand, was 2.68, up from an average of 2.21 in recent auctions. In an encouraging sign, foreign investors, mainly central banks, purchased nearly half the bonds. They normally take only about a third.
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