Solid Demand at 20-year Treasury Bond Auction Heading into FOMC

U.S. Treasuries traded near rebound highs with longer tenors at the forefront of the bounce with the long bond now trading just below its unchanged level while shorter tenors remain behind with the 2-yr note holding the sharpest loss as expected ahead of the FOMC tomorrow. The move came after today’s $13 bln 20-yr Treasury bond reopening meeting solid demand. The sale drew a high yield of 4.592%, which stopped through the when-issued yield by 0.4 bps while the bid-to-cover ratio (2.74x) was above average and indirect takedown (65.4%) was below average (71.4%). The desk gave an A- rating on the auction.

Today’s $13 bln 20-yr bond stopped through the when-issued yield by 0.4 bps. The desk gave an A- rating on the auction. Domestic demand was strong. International demand was weak. Bid to cover was above average. 

  • The domestic demand was above its 12-month average indicative of stronger domestic demand.
  • International demand (indirect) was below the 12-month average
  • Primary dealers were left with just under 10% versus normal around 10.1%

Auction Highlights

  • Duration: 20 Years
  • Amount:  $13 billion
  • High yield 4.592%
  • WI (When-Issued: 4.595%)
  • Stopped through the when-issued yield by 0.4 bps
  • Bid to cover 2.74 vs. 12-month average of 2.64X
  • Directs 25.4% vs. 12-month average of 18.5%
  • Indirects 65.4% vs 12-month average is 71.4% 
  • Dealers 9.2% vs 12 -month average of 10.1%

Auction grade: A-

Yields after the auction.

  • 2-yr: +7 bps to 5.11%
  • 3-yr: +4 bps to 4.78%
  • 5-yr: +3 bps to 4.49%
  • 10-yr: +2 bps to 4.34%
  • 30-yr: +1 bp to 4.40%

Yields before the auction.

  • 2-yr: +4 bps to 5.08%
  • 3-yr: +2 bps to 4.76%
  • 5-yr: +2 bps to 4.48%
  • 10-yr: +2 bps to 4.34%
  • 30-yr: +1 bp to 4.41%

Prior auction results:

  • High yield: 4.499%
  • Bid-to-cover: 2.56
  • Indirect bid: 68.4%
  • Direct bid: 20.2%

Average results of previous 12 auctions:

  • High yield: 4.017%
  • Bid-to-cover: 2.64
  • Indirect bid: 71.4%
  • Direct bid: 18.5%

Live From the Pit

From The TradersCommunity US News Desk

Leave a Reply

Your email address will not be published. Required fields are marked *