Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Treasury Yields Plummet, Yet Demand is Lacking

Interest-Rates / US Bonds Sep 15, 2011 - 04:26 AM GMT

By: Dr_Jeff_Lewis


As yields on Greek debt soared to a record 117% for one-year notes, the US Treasury announced a new auction of 3-year notes with an entirely different response. 

While investors were busy watching Europe for any sign of life, a round of 3-year US Treasury debt escaped auction at a record low rate.  According to the Treasury, the notes sold with a yield of .334% per year, meaning investors will walk away with little more than $10 in 2014 for every $1,000 invested.

Outside of the horribly low yields is the reality that, even while the yields on the bonds fell to record lows, it wasn't demand for the new issues that pushed yields lower.  In fact, fewer bonds were purchased in this auction by non-dealer buyers than any auction in weeks.  Against a bid-to-cover ratio of 3.15--the bid-to-cover ratio is the ratio between bid volumes in dollars and bonds available for sale--the US Treasury sold less than half of the new issues to investors other than primary dealers.

Who's Doing the Bidding?

Primary dealers are large banks hand selected for the purposes of making a US Treasury debt sale a generally normal happening.  When liquidity does not flow in from bidders who are or are not represented by a primary dealer, the dealers are obligated to snap up the remainder.  Recently, being a primary dealer has become a bit of a chore as investors pass up on US Treasury auctions to focus on European issues, which are significantly more active with default fears surging.

At any rate, the disconnect between the rate at which the bonds were issued and the amount of demand for US Treasury issues seems to indicate that investors are not only aware that low yields are their only option, but that doesn't mean investors want US Treasuries.

LIBOR Spreads

The cost of borrowing for the US Treasury, when compared to the cost of bank financing, is incredibly low.  The latest issue of US Treasury debt came with a yield slightly less than that of 3-month LIBOR yields for US dollars, meaning that banks are buying the US Treasury's issues against a much higher annualized return to lend to other banks.

Such a level of fear among bankers is not good for the future of the financial system, and it casts a shadow on the sunshine and rainbows future painted in the early months of 2011.  Remember, it was just weeks ago that new rumors in the European Union sent more money to the European Central Bank than at any point in history.  Now it appears that the fears about a global economic meltdown have hit the US shores--there is simply no other reason why investors would accept lower, longer-term yields if a meltdown wasn't in the cards. 

As any banker should know, a .334% rate for 3 months is much better than the same rate for 3 years.  Apparently the rule of thumb relationship between time and money is no longer in play.

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of and

    Copyright © 2011 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in