Interest Rates

This week’s Treasury bill auctions have produced a little surprise: the three year notes were sold easily, but a day later the five years notes were less well accepted. The result was that five year interest rates rose slightly — the Government had to settle for higher interest rates in order to attract enough buyers of the notes into the market. While one week’s auctions do not make a trend this is something worth noting. Tuck this information away — it may mark the first signs that the market is getting really worried about our endless deficits [the Govenrment sells these notes to cover the debt caused by the budghet deficit]. The fact that the shorter term notes were snapped up and the longer term notes had to be marked down shows the concern the market has about the medium term future. Let’s all watch this space!