Strong Demand at U.S. 20-year Treasury Bond Auction Follows Last Week’s Series

U.S. Treasuries traded firmly with the belly of the curve continuing today’s outperformance pressuring yields toward their lowest levels of the day. Earlier we had a lower-than-expected PPI for December. The completion of today’s $12 bln 20-yr Treasury bond reopening, followed the path of last week’s auctions meeting excellent demand.  The high yield 3.678%, which stopped through the when-issued yield by 2.7 bps while the bid-to-cover ratio (2.83x) and indirect takedown (76.3%) were comfortably above average. The desk gave a B+ rating on the auction. Stocks have sold off most of the day with S&P 500 down 1.3%.

Today’s $12 bln 20-yr bond -2.7 basis point stop through indicative of strong international demand. 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 comfortably above the six-month average
  • Primary dealers were left with just over 8.14% versus normal around 10.8%

Auction Highlights

  • Duration: 20 Years
  • Amount:  $12 billion
  • High yield 3.678%
  • WI 3.705%
  • Tail -2.7 bp vs six-month average of -0.5 basis points
  • Bid to cover 2.83X versus six-month average of 2.57X
  • Directs 15.61% vs six-month average of 17.2%
  • Indirects 76.25% versus six-month average of 71.9%
  • Prime Dealers 8.14% versus six-month average of 10.8%

Auction grade: B+

Yields after the auction.

  • 2-yr: -10 bps to 4.10%
  • 3-yr: -15 bps to 3.72%
  • 5-yr: -16 bps to 3.45%
  • 10-yr: -15 bps to 3.39%
  • 30-yr: -10 bps to 3.55%

Prior auction results:

  • High yield: 3.935% 
  • Bid-to-cover: 2.68
  • Indirect bid: 72.3%
  • Direct bid: 19.0%

Average results of previous 12 auctions:

  • High yield: 3.287%
  • Bid-to-cover: 2.57
  • Indirect bid: 70.0%
  • Direct bid: 17.8%

Auction Measure Definitions

  • Directs a measure of domestic demand
  • Indirects a measure of international demand
  • Dealers take the balance

Live From the Pit

From The TradersCommunity US News Desk