Today and tomorrow, two auctions will affect the trend of global assets .

Long-term U.S. Treasuries will usher in a "hard core test" this week, and concerns about weak demand for Treasuries are starting to spread, and Wall Street believes that if demand remains "miserable", Wall Street believes that if demand remains "miserable".The U.S. stock and bond markets may once again face a "big sell-off".

On Monday local time, the U.S. Treasury Department will conduct a 10-year Treasury auction with a total size of $37 billion, and there is a $21 billion 30-year Treasury auction plan on Tuesday. The pressure caused by large-scale bond issuance has exacerbated the market's concern about the imbalance between supply and demand in the bidding of U.S. bonds this week.

On Friday, U.S. Treasury yields rose more than 10 basis points as the non-farm payrolls report unexpectedly and strongly hit interest rate cut expectations, and the 10-year Treasury yield fell off a three-month low, with the two-year yield hitting a new high this month. The recent rally in U.S. Treasuries has begun to reverse

The market generally believes that the "flood" of long-term bonds in the United States has far exceeded market demand, and the two important auctions this week may plunge the previously large US bond market into a "whirlpool of pain" again.

In its latest report on global economic risks, Deutsche Bank believes that after two years of pressure on the U.S. fiscal deficit, the U.S. debt ceiling turmoil and regional banking turmoil, will a large number of investors pay for U.S. bonds?This could be one of the major market risks for Wall Street next.

BlackRock reported on December 11 that market bets on the Fed's interest rate cut may have been disappointedU.S. financial markets will be more volatile in 2024 and it is recommended to sell off long-term U.S. Treasuries.

This has to mention the huge impact on the market caused by the dismal sale of US 30-year Treasury bonds last month.

On November 9, the U.S. Treasury auctioned $24 billion of 30-year Treasury bondsThe demand is bleak,Described as a "complete disaster", various demand indicators have performed poorly, and overseas demand has ebbed significantly.

Wall Street has mentioned that the data that Wall Street is most concerned about isThe spread between the expected yield on the 30-year Treasury note and the bid rate, also known as the "tail". The higher the tail of the bid, the higher the bond issuer must attract investors to buy the bond at a higher rate than the market rate, which means that the actual demand for the bond is weak. The expected yield on the 30-year Treasury note at the time of last month's auction was 4716%, which is equivalent to the bid rate generated by 5The 3 basis point "tail" is the largest tail spread in history since data began in 2016. And all the demand indicators are poor, and the bid multiple for the 30-year Treasury bond auction is 224, weaker than the previous 235, which is lower than the average multiple of the last six auctions of 244, the lowest since December 2021.

The market reacted quickly to the auction resultsU.S. stocks and U.S. bonds have been hit hard, with the 30-year U.S. Treasury yield posting its biggest one-day gain since March 2020.

Wall Street thinksThe serious imbalance between the supply and demand of long-term debt in the United States remains seriousThis fundamental problem is still unsolvable. The Fed is still implementing quantitative tightening, and the private sector is unable to absorb the sky-high amount of bonds. Concerns about a glut of long-term debt** could impact portfolio and market stability

Primary dealers (i.e., banks that buy bonds at auction and then make markets for them) are key to the U.S. Treasury issuance system. As debt issuance has surged, they have bought more Treasuries than they can sell, which has led to yields on Treasuries maturing 10 years or more that have risen from higher than those traded on swaps (i.e., swap spreads have narrowed).

However, traders would otherwise be able to hedge their bonds** risk through swaps and earn the interest rate differential between the two, leaving primary dealers with no reason to take on large amounts of U.S. Treasuries.

Based on **'s medium- to long-term borrowing needs, it plans to "phase-out" the size of most bond auctions in the quarters from November 2023 to January 2024, and expects to increase the size of the bond auction for another quarter after that to meet its financing needs.

The U.S. Treasury Department released a report last week stating that the federal fiscal deficit for fiscal year 2023 was nearly 1$7 trillion, an increase of $320 billion from the previous fiscal year, or 23% year-over-year, and the annual average of the federal budget gap as a percentage of GDP over the past 40 years is 37%，In 2023, it will rise to 53%, the full-year budget deficit is the third highest in U.S. history.

And this may be just the beginning, as interest rates continue to rise, and the annual interest rate on the national debt will soon exceed $2 trillion. The Congressional Budget Office (CBO) estimated in a report released on December 4 that the cumulative budget deficit in the United States over the next decade will total about $20 trillion.

Some analysts pointed outThe decrease in fiscal revenue and the increase in fiscal spending caused by the increasing downward pressure on the U.S. economy next year will also increase the pressure on U.S. debt and increase the risk of future debt

In the expectation of a further economic slowdown next year, or even into a recession, it is expected that U.S. employment will further weaken, fiscal revenue may continue to decline, and U.S. fiscal spending will remain at a high level, so the U.S. debt stock will further accumulate, superimposed on the high interest rate, and the future U.S. fiscal risk will further increase.