Soft Demand at U.S. 20-year Treasury Bond Auction with Shorter Tenor Underperformance

Today’s $13 billion 20-yr bond auction met weak dollar demand. Treasuries shorter tenors underperformed. The high yield (4.423%) tailed when issued yield by 0.8 bps while the bid-to-cover ratio (2.53x vs 2.64x average) and indirect takedown (62.2% vs 70.7% average) were below average. Equities remain in negative territory with the S&P 500 (-0.8%) fighting to stay above its opening low. The desk gave a D auction grade

  • The domestic demand was above its six-month average indicative of stronger domestic demand
  • International demand (indirect) was comfortably below the six-month average
  • Primary dealers were left with just under 13% versus normal around 9.8%

Auction Highlights

  • Duration: 20 Years
  • Amount:  $13 billion
  • High yield: 4.423% (When-Issued: 4.415%
  • When-Issued WI: 4.415%
  • Tailed the when-issued yield by 0.8 basis points.
  • Bid to cover 2.53X vs. 12-month average of 2.64X
  • Directs 20.5% vs. 12-month average of 19.1%
  • Indirects 62.2% vs 12-month average is 70.7%
  • Dealers 17.30% vs 12-month average of 10.2%

Auction grade: D

Yields after the auction.

  • 2-yr: +13 bps to 4.35%
  • 3-yr: +12 bps to 4.14%
  • 5-yr: +8 bps to 4.02%
  • 10-yr: +3 bps to 4.10%
  • 30-yr: UNCH at 4.30%

Yields before the auction.

  • 2-yr: +13 bps to 4.35%
  • 3-yr: +11 bps to 4.13%
  • 5-yr: +9 bps to 4.04%
  • 10-yr: +6 bps to 4.12%
  • 30-yr: +4 bps to 4.34%

Prior auction results:

  • High yield: 4.213%
  • Bid-to-cover: 2.55
  • Indirect bid: 66.4%
  • Direct bid: 20.7%

Average results of previous 12 auctions:

  • High yield: 4.234%
  • Bid-to-cover: 2.64
  • Indirect bid: 70.7%
  • Direct bid: 19.1%

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From The TradersCommunity US News Desk