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Watch For Treasury Auction to Dominate the Week

10 Year US Treasury Bond Yield
ust10y

30 Year US Treasury Bond Yield
ust30y

This week will be an important week for the funding or our country’s spending agenda. We have the auctions for the longer-term debt this week, and if the last auction is any indication, yields (and our country’s expenses) are headed higher.

I’ve posted the charts of the 10-year and 30-year treasury yields above. You can see two important things on these charts:

1) yields began to increase as a result of the slack demand at the last auction a couple of weeks ago: that was due to two things: (a) after several months of falling yields as the world’s economies faltered – and we enjoyed a flight to safety benefit to our funding – the recent pick-up in economic activity has made other riskier asset classes more attractive, and hence treasuries less desirable; and (b) as this country takes on more debt, China has specifically stated our debt – particularly the longer-term debt – is not attractive to them; and

2) the moving averages are very important: you can see that the 34-day is moving up about to cross over the 13-day (one of the key signs in my investment process of a turn in the market) and even more important, the yield itself has crossed above both moving averages and is rising faster than either.

Look for higher yields on our debt which the current budget does not factor in – meaning that our deficit could potentially be greater than initially anticipated.

This is not dollar friendly nor inflation friendly.

Mark