U.S. Treasury markets barely budged today ahead of this afternoon's $40-billion (U.S.) auction of three-year notes, but the real action today and for most of this week will focus on long-term bonds.
Tomorrow there will be an auction of $25-billion in 10-year bonds. Bond markets will be closed on Wednesday for Remembrance Day in Canada and Veterans Day in the U.S. On Thursday there will be an auction of $16-billion in 30-year U.S. Treasuries.
The yield on 10-year and 30-year U.S. Treasuries have climbed seven basis points and 14 points during the past five trading days, respectively, to 3.49 per cent and 4.4 per cent. (A basis point is 1/100th. of a percentage point.)
It should be "a challenging week for the U.S. Treasury market," said David Rosenberg, chief economist and strategist for Gluskin Sheff + Associates Inc. in a report to clients. "This is a record debt supply and the $81-billion handily takes out the $75-billion a month ago."
There is also speculation that the U.S. Treasury will increase the duration of its portfolio by issuing more long-term bonds, which is likely to push long-term interest rates higher.
"So far [bond]supply hasn't been a problem thanks to safe haven demands and the need to find a home for the trillions of dollars sloshing through the system," said Kim Rupert, managing director of Action Economics. "But in the back of everyone's mind is when will demand dry up and auctions fail?"