November’s Treasury Note Auction Ends on a Mixed Note

The most recent auction of Treasury notes in November closed with less excitement than anticipated. On Tuesday, approximately $40 billion of government debt that matures in seven years was up for sale. However, the highest yield accepted by investors was 4.399%, which is significantly higher than the average yield of 4.258% from the prior six auctions.

This higher yield signifies that the government had to offer more attractive rates to entice investors to purchase the debt. Additionally, the yield was approximately two basis points higher than before the auction, further indicating the need for increased incentives.

This auction followed the successful sales of notes maturing in two and five years on Monday. The demand for the five-year auction was solid, while the two-year auction was relatively weak. These results reinforce the belief that investors are more interested in buying longer-dated debt. Furthermore, the auction of 20-year bonds on November 20th demonstrated considerable strength.

Investors have interpreted these sales as a positive sign that they remain willing to invest in U.S. debt despite the increasing supply. It is worth noting that Treasury issuance through October of this year is 32% higher than at the same time in 2022.

The additional supply of Treasury notes can impact prices and push yields higher. This becomes significant because the yields on 10-year Treasury notes dictate interest rates for credit cards, mortgages, and other bank loans for Americans.

As a result of the recent auction, yields on 10-year debt rose slightly to over 4.37% from 4.35%. This caused the S&P 500 to briefly enter negative territory, although it later recovered and settled just above the break-even line.

Looking ahead, the next auction of Treasury notes is expected to take place on December 11th. The maturity of the notes is projected to be three years, and investors can find the complete schedule on the official website.