Solid Demand at US 30-year Treasury Bond Auction Following April CPI and PPI Data

U.S. Treasuries are trading in positive territory after the completion of a strong $21 billion 30-yr bond auction met solid demand. The high-yield was 3.741%, which stopped through the when-issued yield by 1.5 bps, while the bid-to-cover ratio (2.43x) and indirect takedown (72.4%) were comfortably above average. The auction followed lower than expected CPI and PPI reports for April. The Fixed Interest desk rated it an A completing a strong week after yesterday’s completed $35 bln 10-yr note sale which met solid demand just under a stellar $40 bln 3-yr note sale found stronger interest, with the shorter date in line with the bond market risk profile. 

The bid-to-cover ratio of 2.43X vs 2.37X 12-month average, indirect takedown was 72.4% vs 69.6% 12-month average. The desk gave an A rating on the auction. Today’s buying is two monthes after the Collapse of banking shares suggests the bond market is already looking past inflation-related headlines to capital preservation and an expected deceleration in growth.

Auction Highlights

  • Duration: 30 Years
  • Amount:  $21 billion
  • High yield 3.741%
  • WI level at time of auction 3.756%
  • Stopped through WI yield by 1.5 bps vs +0.1 basis points 6-month average
  • Bid to cover 2.43X vs 2.37X 12-month average
  • Directs (a measure of domestic demand) 17.4% vs 19.8% 12-month average
  • Indirect (a measure of international demand) 72.4% vs 69.6% 12-month average
  • Dealers (they take the rest) 10.20% vs. 11.6% 12-month average

Auction grade: A

Yields after the auction.

  • 2-yr: UNCH at 3.90%
  • 3-yr: -2 bps to 3.55%
  • 5-yr: -1 bp to 3.36%
  • 10-yr: -4 bps to 3.40%
  • 30-yr: -5 bps to 3.75%

The Auction came after the April CPI and PPI releases for the U.S.

US Producer Price Inflation Moderates Again in April, +2.3% versus +2.7% in March
Consumer Inflation in April Eases with Fed Screws Tightening, Core CPI Stays Elevated

Yields ahead of the auction.

  • High yield: 3.661%
  • Bid-to-cover: 2.36
  • Indirect bid: 69.1%
  • Direct bid: 19.8%

Prior auction results:

  • 2-yr: -7 bps to 3.83%
  • 3-yr: -8 bps to 3.49%
  • 5-yr: -7 bps to 3.31%
  • 10-yr: -7 bps to 3.37%
  • 30-yr: -5 bps to 3.75%

Average results of previous 12 auctions:

  • High yield: 3.545%
  • Bid-to-cover: 2.37
  • Indirect bid: 69.6%
  • Direct bid: 18.5%

This Week’s Other Treasury Auctions

Solid Demand at 10-year U.S. Treasury Bond Auction Following CPI Report
Strong Demand at 3-Year Treasury Bond Auction with High Yield 3.695% 2.8 bps Stop Through

Live From the Pit

From The TradersCommunity US News Desk