'It's a fantastic auction," exclaimed Bill O'Donnell from his desk on Royal Bank of Scotland's vast trading floor in Stamford, Connecticut. It was early Wednesday afternoon and there was nothing fantastic about the state of the stock markets, with the Dow Jones Industrial Average down about 200 points as rumours swirled about the health of French banks.
O'Donnell, one of RBS's chief fixed-income strategists, was instead talking about the US government's first sale of 10-year bonds since it dramatically lost its AAA credit rating five days before.
The pressure that had built as salespeople took orders from customers for a slug of the $24bn (£15bn) of debt was dissipating. And, among the hundreds of headlines scrolling at high-speed down the banks of Bloomberg terminals that pepper the 90,000 sq ft trading floor, you only needed to look at a handful to see the auction's success.
The US Treasury had managed to borrow money for 10 years by offering buyers a yield of 2.14pc, the lowest on record. The bid to cover ratio, a measure of demand used in the bond markets, was stronger than the average for the past 10 sales.
The much-anticipated auction had been given a helping hand from the Federal Reserve the day before, when the central bank promised to keep interest rates at record low levels until at least 2013 in its latest effort to shore up the economy. "There's currently a desperate need for yield," said O'Donnell. "The Fed has pushed short-term interest rates so low that people will be forced to take on more risk."
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