America’s bonds are getting harder to sell

livemint.com:

A series of weak auctions for U.S. Treasurys are stoking investors’ concerns that markets will struggle to absorb an incoming rush of government debt. A selloff sparked by a hotter-than-expected inflation report intensified this past week after lackluster demand for a $39 billion sale of 10-year Treasurys.

Investors also showed tepid interest in auctions for three-year and 30-year Treasurys. Behind their caution lies a growing conviction that inflation isn’t fully tamed and that the Federal Reserve will leave interest rates at multidecade highs for months, if not years, to come. The 10-year yield—the benchmark for borrowing rates on everything from mortgages to corporate loans—finished the week around 4.5%, near its highest levels since touching 5% in October.

At the same time, the government is poised to sell another $386 billion or so of bonds in May—an onslaught that Wall Street expects to continue no matter who wins November’s presidential election. While few fear a failed auction—an unlikely scenario that analysts said could potentially trigger prolonged turmoil—some worry that a glut of Treasurys will rattle other parts of the markets, raise the cost of government borrowing and hurt the economy. “There’s been a big shift in the market narrative.

The CPI [consumer-price index] report changed everybody’s view of where Fed policy is headed," said James St. Aubin, chief investment officer at Sierra Mutual Funds. The government funds its operations by selling the world’s safest bonds to investors and dealers at regular auctions.

And issuance of Treasurys has exploded since the pandemic began. In the first three months of 2024, the U.S. sold $7.2 trillion of debt, the largest quarterly total on record.