Posted by Joseph Y. Calhoun, III

The German government tried to sell some new Bunds yesterday. The key word in that sentence is “tried”:

Fears that governments may not be able to fund their vast borrowings over the next few years without a rise in interest rates were fuelled yesterday as a major auction of German government bonds failed.

The German authorities only managed to sell two thirds of the €6bn (£5.4bn) of 10-year maturity securities that they offered to the market. “I would call this a failed auction,” said David Keeble, head of fixed-income strategy in London at Crédit Agricole. “There was no doubt that this was a very poor start of the auction season.”

This is probably not the start of trend…yet, but our biggest buyer is probably going to buy a few less Treasuries in the near future:

Jan. 8 (Bloomberg) — U.S. Treasury yields are unlikely to climb significantly should a decline in China’s foreign-exchange reserves force the nation to scale back purchases of the securities, according to Fitch Ratings Ltd.

The New York Times reported yesterday that China is losing its appetite for debt from the U.S. and said this could have “painful effects for American borrowers.” Demand for Treasuries remains robust with investors shifting out of riskier assets, and yields on 10-year bills are close to historical lows, said James McCormack, the Hong Kong-based head of Asian sovereign ratings at Fitch.

I would point out that Fitch was also rating sub prime mortgage pools as AAA, so take this with a giant grain of salt.