The April 10, 2024, auction of 10-year U.S. Treasury notes revealed a statistically concerning trend for the American government’s long-term debt securities.
Demand from key investors is evaporating, a reflection of growing skepticism towards the sustainability and safety of the United States’ rapidly increasing debt load.
Notably, foreign buyers, who traditionally play a significant role in purchasing U.S. debt, reduced their participation to 61.8%, a sharp drop from previous levels and the lowest since October 2023.
This decline is significant, falling well below the average foreign participation rate observed over the last six auctions.
Similarly, direct purchases by investors plummeted to a mere 14.2%, marking the lowest point since November 2021.
As a result, primary dealers, or the middlemen who buy directly from the government and sell to investors, were forced to absorb a much larger portion of the debt, taking on 24.0% of the auction.
This is the highest, forced dealer uptake since November 2022, underscoring the diminishing appetite among traditional buyers for U.S. long-term debt, due to fears over its growing unsustainability and associated risk of a U.S. debt default.
