Solid International Demand at U.S. 20-year Treasury Bond Auction

U.S. Treasuries sold off and hang just above session lows with longer tenors trading behind. Treasuries did move higher in immediate reaction to the completion of today’s $13 billion 20-yr bond reopening, which met solid demand. The sale drew a high yield of 5.245%, which stopped through the when-issued yield by 1.2 bps. However, the bid-to-cover ratio (2.59x) was just below the prior 12-auction average (2.65x), but indirect takedown (72.9%) was comfortably above average (70.5%). The fixed interest desk gave the auction a B rating.

Fed Governor Waller (FOMC voter) earlier said that he expects that one more rate hike will be needed while New York Fed President (FOMC voter) Williams said that he is not yet ready to declare victory over inflation. Later in the session we will see the Fed Beige Book.

Today’s $13bln 20-yr bond -1.2 basis point stop through indicative of strong international demand and soft. The desk gave a B rating on the auction.

  • The domestic demand was below its six-month average indicative of softer domestic demand
  • International demand (indirect) was also comfortably above the six-month average
  • Primary dealers were left with just over than 10% versus normal around 14.3%

Auction Highlights

  • Duration: 20 Years
  • Amount:  $12 billion
  • High yield 5.245%
  • WI 5.257%
  • Stopped through the when-issued yield by 1.2 bps.
  • Bid to cover 2.59X vs. 12-month average of 2.65X
  • Directs 15.2% vs. 12-month average of 19.3%
  • Indirects 72.9% vs 12-month average is 70.5%%
  • Dealers 9.9% vs 12-month average of 10.2%

Auction grade: B

Yields after the auction

  • 2-yr: +2 bps to 5.22%
  • 3-yr: +2 bps to 5.04%
  • 5-yr: +4 bps to 4.91%
  • 10-yr: +5 bps to 4.89%
  • 30-yr: +4 bps to 4.99%

Prior auction results:

  • High yield: 4.592%
  • Bid-to-cover: 2.74
  • Indirect bid: 65.4%
  • Direct bid: 25.4%

Average results of previous 12 auctions:

  • High yield: 4.081%
  • Bid-to-cover: 2.65
  • Indirect bid: 70.5%
  • Direct bid: 19.3%

Live From the Pit

From The TradersCommunity US News Desk