U.S. Sees Brisk Auction Demand; Huge Deficit. Low Rates. No Problem in Treasury Sale
NEW YORK--The Treasury's $21 billion 10-year note sale Wednesday afternoon saw some of the strongest demand since at least the 1980s, helping long-dated Treasury securities recoup most of their early losses.</br></br>The whole market, however, remained lower ahead of Thursday's $13 billion 30-year bond auction. The 10-year note auction, an additional sale of the offering in February, drew $72.47 billion in bids--3.45 times the amount on offer. It followed a strong auction of $40 billion in three-year notes a day earlier.</br></br>Demand from foreign investors, including central banks, was stronger than the recent average in both auctions, allowing the U.S. government to continuously fund an unprecedentedly high budget deficit at historically low borrowing costs. Wednesday afternoon, the U.S. government reported its largest-ever monthly budget deficit in February as the country's fiscal year-to-date deficit ballooned more than 10% to a record of $651.60 billion.</br></br>The strong bid is even more impressive given the heavy load of corporate bond supply competing for investors' money. More than $25 billion of new corporate debt supply has flooded the fixed-income market since Monday. Even in the euro zone, easing worries about fiscal and debt problems helped Portugal sell [euro]990 million of a long-maturity government bond after planning to sell only [euro]750 million.</br></br>"The response to this auction was just astounding to us, and once again confounds those equating large issuance with a spike in yields," said Dan Greenhaus, chief economic and bond strategist at Miller, Tabak & Co. in New York. "That is not to say higher yields won't materialize eventually, but for now, the Treasury is incredibly able to bring monster amounts of debt to market with almost no difficulty."