The $25 billion sale of 30-year treasury yields was regarded as “weak.” Yields, however, on both the 30-year and 10-year benchmark are still lower today than at the start of the year. The 30-year was yielding around 4.81% and 10-year was yielding about 4.56% on January 2. Today the yields are 4.80% and 4.25%, respectively.
The two-year Treasury or the instrument most sensitive to monetary policy, however, is about 54 bps points lower from the beginning of the year.
Today’s yields are perhaps a direct contradiction to the narrative that investors are becoming surfeit on government debt.
What narrative is correct?
Equites reversed an earlier day advance to close about moderately lower, the catalyst of which was the outcome of the 30-year Treasury auction. Equites have been on a blistering rally since their April lows and historically August and September are the worst months for stocks.
There was some attention focused on the “Buffet Indicator” which indicates that the market is at a record 2.3 standard deviations above its historical trend. Writing it differently, this only happens 1 time out of 100. In 2000 the market was at 2.0 standard deviations above its historical trend.
The world today is radically different from the one of the last 30 years. The potential outcomes are infinite.
However, there are some truisms such as more things change the more they remain the same. Complacency breeds risk. It is never different there are just different people.
What will happen today?
Last night the foreign markets were mixed. London was down 0.06%, Paris up 0.17% and Frankfurt down 0.02%. China was down 0.12%, Japan up 1.85% and Hang Seng down 0.89%.
Futures are up about 0.25% in a week buffeted by tariffs, geopolitical events and corporate earnings. Gold jumped after the US put tariffs on bullion bars. The 10-year is off 2/32 to yield 4.26%.
