China and US agree to extend trade tariff truce, says Li
The U.S. Treasury is gearing up for a series of note and bond auctions that are attracting heightened attention as indicators of market sentiment towards U.S. assets. Amid the looming July 9 deadline for a 90-day pause on reciprocal tariffs to end, investors are displaying a strong interest in short and medium-term U.S. debt, while the demand for long-term bonds appears less certain.
The auctions, which are typically routine, have gained prominence as a barometer of both foreign and domestic demand. The Treasury plans to offer $119 billion in three- and 10-year notes along with 30-year bonds. The 30-year bond sale, in particular, is under scrutiny as investors assess the willingness to invest in countries with significant fiscal deficits and large debt burdens.
The context of these auctions is marked by the resurgence of bond vigilantes, who are expressing skepticism about fiscal excesses worldwide. This skepticism is fueled by concerns that President Donald Trump’s trade policies and tax reductions may lead to inflation, while tariffs could restrict global growth and compel governments to increase spending.
Adding to these concerns is the recent downgrade of the U.S. credit rating by Moody’s last month, highlighting the risks associated with the country’s $36 trillion debt.
The Treasury will commence its auctions on Tuesday with $58 billion in three-year notes, followed by $39 billion in 10-year notes on Wednesday, and concluding with $22 billion in 30-year bonds on Thursday. Analysts are generally expecting these auctions to be conducted without any major issues.
Previous auctions have shown robust demand, with last month’s three-year note auction drawing solid interest. Indirect bids, which include foreign central banks, accounted for 62% of the total issuance. This was slightly lower than in April but aligned with the average of the last twelve auctions.
Foreign investors, particularly official buyers, have historically shown a preference for shorter-term U.S. Treasuries, especially those with maturities under five years, as noted in the latest U.S. Treasury survey.
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