More About Treasury Auctions

Not quite as expected
If you've been following my recent posts about US treasury bonds, you'll know that I've been suggesting a connection between the auctions of longer term US treasuries and stocks falling. You may have also observed what I had suggested may happen last week didn't really eventuate, well not to any great degree anyway. Sure the S&P 500 fell on the 7th only to recover on the 8th and 9th to finish just a few points below where it started it's fall on the 7th, going on to round off the week higher.

This doesn't mean there isn't a link
Although last week stocks the fell on first day of the longer term treasury auctions (7th Sep) they didn't continue to fall for the following two days, during which time more long term treasuries were being auctioned. I have previously shown that this has generally been the case during previous auctions. There was however an article on Reuters that would suggest that there is a direct correlation between the auction of longer term US treasuries and falls in shares. Here is a snippet from the Reuters article

"30-yr auction tails, dealing Treasuries another blow, NEW YORK, Sept 9 (Reuters) - U.S. Treasuries fell on Thursday after jobs and trade data suggested the economy wasn't as weak as feared, boosting riskier assets such as stocks and hurting demand at the government's long-bond auction."

Admission of a link
That single paragraph above confirms to me what I have long believed and have confirmed over number of months, that there is a direct connection between these two areas of investment. It would appear that if investors are dissatisfied with the risks associated with holding stocks, they flee to the perceived safety of US Treasuries, a perception that seems to be re-enforced with the help of the media.

I'll continue to follow bond auctions
I will to continue to follow the Longer term US treasury auctions going forward as I'm of the opinion there is risk of downward movement in the stock indices each time longer term treasuries come up for auction. Whilst I won't be writing weekly/fortnightly posts on the subject, I'll be including a copy of the US treasury auction details as it appears on this page in my "The week ahead" posts so you can be informed, do your own research and make informed investment decisions.

If you missed it
Past posts that cover this topic are US Treasury Auctions, US Treasury Auctions Part 2 and More Market Manipulation.