The U.S. 3-year note auction has concluded, drawing a 3.824% yield compared to the pre-sale yield of 3.826%. A lower yield signals greater-than-expected demand for these notes. The previous auction resulted in a rate of 3.784%.
What Do the Auction Results Mean?
A lower-than-expected yield signals that buyers are willing to accept lower returns for government debt. Furthermore, this could be attributed to buyers expressing doubt about the state of the U.S. economy, leading them to pile into safer assets in the form of government securities and accepting a lower yield.
Interestingly, yields across the U.S. Treasury curve, which are influenced by the federal funds rate, are still relatively high, as demonstrated in the image below. It is also worth noting that the Federal Reserve will hold its next Federal Open Market Committee (FOMC) meeting on May 6 and 7, where they are expected to leave the federal funds rate unchanged between 4.25% and 4.50%.
