Yesterday’s Bond Auction was surprisingly strong. Investors bid 3.72 times the amount of 10-year notes offered, the highest since 1994. This is a number that indicates the “demand” for the auction, and normally averages 2.87. All this means that demand was stronger than expected (good news, with such a large sale of US Bonds), and that this demand worked to raise prices (lower interest rates) slightly from the run-up over the past couple of days.
Near-4% is a high interest rate, relative in the world market, and money flowed to it. This is partly on the believed strength of the US to repay. But again, it’s a world market, and rates reflect what people believe to be risk. –And being at the high end of interest rates around the world is again, not a category that I would be proud of.
In part, Greece challenges continue. This goes in and out of people’s concern; and we only shall see what will happen. The global economies are challenged; and nations would do well to be scrupulously prudent about their economic affairs. (Read, spending.) Notwithstanding, we can presume that the EU community will do whatever is necessary to stable Greece — and it’s own Euro affairs in the process.
We may not have seen a ceiling in interest rates (floor in bond prices), but for time being, it seems to have stabilized. If, on whatever news, it breaks out, look to lock in rates.
On Fed news, Chairman Bernanke reported that “joblessness, home foreclosures and weak lending to small businesses pose challenges to the economy as it recovers from the worst recession since the 1930s.” Well said. Particularly weak (and important), in my opinion, is lending to small business. But if you’re in this situation, as a commercial broker, even in this tightening environment, we still have resources and money to lend.
