The Commercial Real Estate Alpha Site

A series of weak auctions for U.S. Treasuries are stoking concerns that markets will struggle to absorb an incoming rush of government debt. A selloff sparked by a hotter-than-expected inflation report intensified this past week after lackluster demand for a $39 billion sale of 10-year Treasuries. Issuance of Treasuries has exploded since the pandemic began: in the first three months of 2024, the U.S. sold $7.2 trillion of debt, the largest quarterly total on record. The government is poised to sell another $386 billion or so of bonds in May – a pace that Wall Street expects to continue no matter who wins the election in November.

Given that people and companies are likely pulling out money to pay taxes, the liquidity crunch doesn’t come as a total surprise – it’s a bit of an air pocket as folks manage outflows around tax time. The Fed looking towards quantitative tightening, per their March minutes, also gives signs of hope. The trend is worrisome and certainly something to monitor but the Fed and government officials have plenty of tools at their disposal to ensure that liquidity and demand stay high.