The Treasury Department sold $40 billion of five-year notes on May 26, and the biggest news may not have been the low yield that the securities posted.
Bonds' prices and yields move inversely to each other; at a time when demand is high (like the present), prices shoot up and yields plummet. That was the case in the Treasury's May 26 auction, where the five-year notes being sold had yields of just 2.13 percent. It was the lowest yield for a new Treasury security in 13 months.
But the most telling piece of data from the auction was the balance of direct and indirect bidders. Historically, indirect bidders - a group that includes foreign money managers - buys 45.5 percent of the Treasury's newly issued securities. On May 26, the indirect share was just 40.6 percent. Direct bidders (including domestic investors) bought 15.3 percent, meanwhile - the highest direct share in two years.
The shift is a sign that American investors are growing more confident in the United States' recovery than that of the outside world. The Organization of Economic Cooperation and Development said recently that it sees weak growth prospects for the euro-zone until late 2011. The U.S. economy, meanwhile, is expected to improve slowly but steadily until then.
