US to Hold $120 Billion Treasury Auctions Over Three Days... Likely a Turning Point for Interest Rate Rise

[Image source= Reuters Yonhap News]

[Asia Economy Reporter Byunghee Park] The U.S. Treasury Department will conduct auctions of $120 billion worth of government bonds over three days starting on the 9th (local time). Wall Street expects the results of this bond auction to be a significant turning point in the recent rise of bond yields.

According to major foreign media, the U.S. Treasury will auction $58 billion worth of 3-year bonds on the 9th. On the 10th, it will auction $38 billion worth of 10-year bonds, and on the 11th, $24 billion worth of 30-year bonds.

Interest in this auction is heightened because demand was weak in the $62 billion auction of 7-year bonds conducted by the Treasury on the 25th of last month.

Recently, as government bonds have been sold off in the secondary market, the yield on the U.S. 10-year Treasury bond, which was below 1% at the beginning of the year, has risen to around 1.6%. After reaching 1.6%, it has shown a pattern of repeated sharp rises and falls, exploring its future direction. Therefore, the results of the three-day bond auction are expected to be an important variable in determining the future trend.

Padraig Gaffey, an investment strategist at ING, said that since interest rates have risen, demand is expected to strengthen, but if demand is weak, it could be a factor that pushes yields even higher.

Attention is also focused on how much overseas investors will purchase government bonds. According to statistics from the Japanese Ministry of Finance, Japanese funds sold $34 billion worth of foreign bonds over two weeks in mid-last month.

In this regard, Ian Linzen, an investment strategist at BMO Capital Markets, estimated that Japanese funds sold U.S. Treasury bonds. However, on the other hand, there is also an analysis that this is a typical trading pattern shown by Japanese funds ahead of the March fiscal year-end closing.