Behind the cool auction of US seven-year treasury bond bonds

On the big chessboard of the global financial market, the US treasury bond bond market has always occupied a pivotal position and can be called the key hub of the global economy and financial system. However, the recent auction of US seven-year treasury bond was cold, and overseas demand continued to decline. This abnormal phenomenon was like a warning bell, which caused widespread concern and deep concern in the financial field. The economic problems and potential risks reflected behind it deserve in-depth analysis.

Recently, the auction results of the US Treasury Department's issuance of $44 billion 7-year US Treasury bonds have been astonishing. The winning interest rate is 4.123%, which is 11 basis points lower than the previous batch in March, but still higher than the pre issuance interest rate of 4.121%. This marks the second consecutive occurrence of a tail spread representing weak demand. The bidding multiple is only 2.55 times, lower than the average of 2.67 times in the past six auctions. From the perspective of allocation ratio, the allocation ratio of direct bidders reached 25.44%, but decreased from 26.1% last month; The share of indirect bidders (foreign buyers) is only 59.3%, lower than 61.2% in March and the lowest level since December 2021. The allocation ratio of primary traders is as high as 15.3%, the highest since May 2024. All kinds of data point to the dismal demand for this auction.

The sustained decline in overseas demand is due to the combined effects of multiple factors. From an economic perspective, the Fed's long-term interest rate hike policy has brought about profound changes in the global interest rate landscape. Other central banks are also adjusting their monetary policies, and some countries have begun to consider raising interest rates despite maintaining low interest rates. The interest rate gap in the global bond market is gradually narrowing. In this context, investors' asset allocation strategies have changed accordingly, and their interest in US bonds has significantly decreased.

The uncertainty of economic prospects is also an important factor. The pace of global economic recovery is uneven, and many countries are facing the dual dilemma of high inflation and slowing economic growth. In this volatile environment, investors have significantly reduced risk appetite and are more inclined to choose safer and more stable investment targets, greatly reducing the attractiveness of US bonds.

Geopolitical risks cannot be ignored either. The frequent friction created by the United States in international affairs, tense trade relations, and escalating geopolitical conflicts have made global investors more cautious in asset allocation and investment decisions regarding US bonds. Taking the China US trade friction as an example, the instability of trade relations has caused investors to worry about the future direction of the US economy, leading to a reduction in their holdings of US bonds.

In the financial market, the cold auction will hit investors' confidence in US treasury bond bonds, causing the market to question the security of US bonds. This confidence crisis may quickly spread to other asset classes, leading to stock market volatility, intensified commodity market volatility, and a serious threat to the stability of the entire financial market. Once investors lose confidence in US bonds, a large amount of funds will flow out of the US treasury bond bond market, which will trigger a chain reaction and make the US financial market into chaos.

Faced with this dilemma, the US government and the Federal Reserve need to weigh carefully and take effective measures to stabilize the treasury bond bond market. The Federal Reserve may need to re-examine its current monetary policy and seek a new balance between controlling inflation and stabilizing the economy. The government should also start to adjust fiscal policies, optimize the structure of fiscal expenditure, reduce unnecessary fiscal deficits, and enhance investors' confidence in the US economy and treasury bond.

For global investors, in the context of intensified volatility in the US Treasury market, it is necessary to pay more attention to portfolio diversification, reduce dependence on a single asset, and diversify investment risks. At the same time, closely monitor the global economic situation and policy dynamics, adjust investment strategies in a timely manner to adapt to the constantly changing market environment.

The cold auction of US seven-year treasury bond and the sluggish overseas demand are a severe test facing the US economy and the global financial market. This phenomenon reminds us that in the context of globalization, any country's economic policies and market fluctuations can have widespread spillover effects. Only by working together and strengthening policy coordination and cooperation among countries can we effectively address various challenges in the global economic and financial fields, and maintain the stability and prosperity of the global economy.