The stock market hates uncertainty. So with the control of Congress still undecided after yesterday’s election, the last thing investors needed was a shaky auction of 10-Year Treasuries today.
But that’s exactly what financial markets got: One of the worst 10-year Treasury note auctions in years.
Here’s how Bloomberg describes the nuts and bolts of the auction: “Wednesday’s $35 billion auction of new 10-year notes drew a yield of 4.140%, more than three basis points above the level in pre-auction trading just before the bidding deadline. That’s a sign that dealers overestimated demand for the highest-yielding 10-year note since 2008.”
The miss is the biggest since December 2009.
Fortunately, bond market reaction was limited today. The yield on the 10-year Treasury actually fell 4 basis points to 4.08%.
The tempered reaction is, in my opinion, a recognition that with new CPI inflation numbers due tomorrow, it’s only understandable that demand for the 10-year Treasury would be weaker than expected.
Which does, of course, raise the question of how a market already showing signs of inflation worry will react to tomorrow’s inflation report.
With real-world uncertainty running high, financial market anxiety isn’t exactly a plus.