The 30 yr bond auction was excellent and in stark contrast to yesterday’s poor 10 yr. I’m sure the CPI figure helped out and the moderation is welcome but it doesn’t take an economist to understand that core goods prices have been falling on a rate of change basis for 7 out of the last 8 months. And that services inflation (ex the medical care issue) has been pushed ever higher because of the way the BLS calculates rents vs rents that in the real world are slowing down in the pace of its gains. But we know that and have for months. Again, the debate from here should be how fast inflation falls and where it settles out at on a sustainable basis, not whether its peaked or not as that’s been clear for months to some of us. I see little chance in the coming years that we fall back to a sustainable 1-2% inflation rate that we saw pre-Covid. I’m in the 3-4% camp.
The yield was 4.08%, 3 bps below the when issued (yesterday’s 10 yr was 4 bps above). The bid to cover of 2.42 was above the one yr average of 2.34. Lastly, direct and indirect bidders took down 90% of the auction, the most I’ve seen dating back to 2006 when the 30 yr was reintroduced.