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Why Treasury Auctions Have Wall Street on Edge (WSJ)
The U.S. Treasury prefers its debt sales to be humdrum affairs. Lately, they are sparking fireworks in markets.
Scrutiny of Treasury auctions—whereby the government funds operations by selling the world’s safest bonds to big banks and dealers—has grown alongside their size. For years, many in Washington and on Wall Street assumed that investors would buy any number of bonds the government issued, no matter the fiscal outlook. Testing that assumption: the sale of $20.8 trillion of new Treasurys in the first 11 months of the year—set to surpass 2020’s record of just under $21 trillion.
Whether the market can absorb the rolling waves of debt without disruption is the biggest question on Wall Street ahead of this week’s planned Treasury auctions. A combined $108 billion of 3-year, 10-year and 30-year bonds hit the block Monday and Tuesday, along with $213 billion of shorter-term bills. The last 30-year auction was so poorly received that it rattled other parts of the markets. Investors fear that signs of weak demand might spread similar tumult, raise the cost of government borrowing and hurt the economy.
https://archive.ph/e9ojK
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