Treasury auctions show investors embracing new high yield of the government universe

When anyone talks to you about high yield, what comes to you mind?

Junk rated companies offering high coupon rates with even higher yield! Well, expand you high-yield universe. In government debt market, treasuries are the new high-yield debt, just with top credit ratings.

With a universe where globally, $10 trillion worth of bonds are trading in negative yield, of which more than 60% are longer dated ones, an yield of 0.72% in two year is big deal and 1.75% in 10 year is almost like fantastic return.

Recent trend is insurers and banks outside United States are jumping to U.S. government bonds.

So it was no wonder in this week’s 10 year auction primary dealers took just 14.7% of $23 billion on offer, second lowest on record. Investors bidding with primary dealers took away the lion share of 73.5%.