Wall Street has recently become quite confident that both the Federal Reserve setting its shortest-term interest rates, and the bond markets with their longer-term rates, were going quickly toward more “easy money,” provided the media constantly pushed the meaningless phrase “threat of recession.” Despite, however, a bad U.S. July jobs report, and some stock market plunge days, bond market interest rates rose this week—in some cases sharply—after more than a month of declines.
The U.S. Treasury suffered a “very weak” auction of 10-year notes on Aug. 7, according to many reports based on Bloomberg News. Of the $52 billion in 10-year notes offered, 27% had to be bought and held by the “primary dealer” megabanks through which Treasury auctions are organized, whereas the recent years’ average is 12%. “Foreigners are very little help now,” Bloomberg quoted one trader/analyst, Peter Boockvar. (He is overlooking the real foreigners, the Caymans and Jersey/Guernsey and Luxembourg and all offshore London, etc., which remain a big help.) Consequently the 10-year interest rate, which the big banks had been pushing down steadily to about 3.72% on Aug. 5, suddenly rose back up to 3.98% on Aug. 7, and is in that range now.
