The market can be much more volatile when few people are trading. That’s because one big trade can really push the market one way or the other. The period between Christmas and New Year’s Day is always a slow trading time.

When I realized the U.S. was planning to sell $35 billion in 2-year Treasury bonds today, I was a little worried and wondered why they didn’t wait until next week.

Fortunately, the auction went far better than expected. The last ten auctions produced a 3.31 bid-to-cover ratio. That means the Treasury could have sold 3.31 times as much as offered. Today, it was 3.71 times. The strong demand for our debt is amazing. While the Fed has been buying some of the Treasury bonds, foreign governments have actually started to increase their purchases. Those who worry the bond vigilantes will stop buying our bonds didn’t find any support for that argument today.

By the way, I am one of those who worry about bond vigilantes! What kept the vigilantes at bay was that the interest rate paid to the bond buyers today increased from about 0.71% to 0.74%, which is a big one-day jump.

Tomorrow, the Treasury will be auctioning off another $35 billion in 5-year bonds, and I’ll be watching . . .