Treasury Yields Headed Higher

Treasury Yields have been rising as the government borrows more and more.

Treasury 10-year notes fell, pushing yields above 3 percent for the first time since the Federal Reserve announced a plan to buy U.S. debt

The benchmark note’s yield had held between 2.46 percent and 2.99 percent since March 19, the day after the Fed said it would buy up to $300 billion in U.S. securities over six months.

In record-setting auctions, the Treasury will offer $101 billion in new bonds this week.

Congress has authorized massive spending. It's spending money that it doesn't have. So Treasury is borrowing the money by selling bonds. Lots and lots and lots of bonds. This gushing supply of bonds should drive prices lower and yields higher.

“Supply definitely continues to be a factor,” said Adam Brown, director of Treasury trading at Barclays Capital Inc. in New York, one of 16 primary dealers that trade with the central bank.

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At the time of publication the author held long positions in TBT

Source:
Daniel Kruger. Treasury 10-Year Yields 3% for First Time Since Before Buybacks.
Bloomberg. April 25, 2009.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aaSYyxBbqcbY

© 2009 Michael Cale