US Treasury Auction - Record High since GFC

[Bushman]

Does a record treasury auction spell the end of this leg of the share market rally? Sometimes, if it quacks like a duck, it is a duck. Watch out Aussie dollar too if there is a 'flight to safety'.

'Treasuries rallied as a record $44 billion sale of two-year notes drew the strongest demand since the financial crisis began and a report showed confidence among U.S. consumers unexpectedly fell this month.

Two-year note yields declined as much as 10 basis points, the most on an intraday basis since June 9. The auction drew a bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, of 3.63. '

 

[explod]

Does a record treasury auction spell the end of this leg of the share market rally? Sometimes, if it quacks like a duck, it is a duck. Watch out Aussie dollar too if there is a 'flight to safety'.

'Treasuries rallied as a record $44 billion sale of two-year notes drew the strongest demand since the financial crisis began and a report showed confidence among U.S. consumers unexpectedly fell this month.

Two-year note yields declined as much as 10 basis points, the most on an intraday basis since June 9. The auction drew a bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, of 3.63. '

I am just an old basic trend follower on the ASX only (yes I know theres much betters way, but thats me)

Is there someone out there that can put the above into simple language as I have cottened on that this scenario could cause a lot of problems. ???

 

[Bushman]

A greater demand for US treasuries usually means a 'flight to safety' or greater risk aversion. Hence money flows from riskier assets (i.e. stocks) to less riskier assets like US gov't treasuries.

 

[explod]

A greater demand for US treasuries usually means a 'flight to safety' or greater risk aversion. Hence money flows from riskier assets (i.e. stocks) to less riskier assets like US gov't treasuries.

I hear many saying the US treasuries are themselves becoming risky, what is your take on that ?

 

[Bushman]

I hear many saying the US treasuries are themselves becoming risky, what is your take on that ?

That is the longer-term trend for sure - basic demand/supply plus a huge deficit will come home to roost. However, in the short-term, old habits are hard to break and US treasuries will continue to be seen as a safe haven. IMO