Gentlemen and bonds -- too much of a good thing

“Gentlemen prefer bonds.”
Andrew Mellon

Treasury plans to sell $123 billion in one week.

$44 billion in 2-years
$41 billion in 5-years
$31 billion in 7-years
$8 billion in TIPS

Unfortunately, too much of a good thing may have an effect on price. Nevertheless, economic news trumps supply issues and the soft economy numbers were more relevant to investors than supply. What is very unusual is the strong bid to cover of these auctions. The 2-year bid to cover was over 3.5 which sends a clear signal that there is a strong demand for these securities. If investors are willing to hold the risk-free assets in a rising economy it suggest that they re not big believers in the economic recovery.