U.S. 20-year Treasury Bond Auction Sees Solid Demand Amongst Debt Ceiling Muddle

U.S. Treasuries closed with losses across the curve after giving back their opening gains with longer tenors seeing some buying in immediate reaction to today’s $15 bln 20-yr bond sale, which met solid demand, however the post-auction bid quickly gave way to a slip to fresh lows into the close. Todays followed last weeks’ strong 3-, 10- and 30-year auctions. Today’s sale drew a high yield of 3.954%, which stopped through the when-issued yield by a basis point. The bid-to-cover ratio (2.56x vs 2.59x) and indirect takedown (70.6% vs 71.4%) were a bit below the 12-month averages.

The desk gave an C-rating on the auction. The debt ceiling overhangs with President Biden expressing confidence that a solution will be found soon while House Speaker McCarthy said that a deal could be reached by Sunday.

Today’s $15 bln 20-yr bond stopped through the when-issued yield by a basis point. The desk gave a C- rating on the auction.

  • 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 over than 10% versus normal around 9.5%

Auction Highlights

  • Duration: 20 Years
  • Amount:  $12 billion
  • High yield 3.954%
  • WI 3.964%
  • Stopped Through +1.0 basis points vs. six-month average of -1.3 basis points
  • Bid to cover 2.56X vs. 12-month average of 2.59X
  • Directs 18.1% vs. 12-month average of 17.8%
  • Indirects 70.6% vs 12-month average is 71.4% 
  • Dealers 11.3%  vs 6 -month average of 9.5%

Auction grade: C-

Yields after the auction

  • 2-yr: +9 bps to 4.16%
  • 3-yr: +9 bps to 3.82%
  • 5-yr: +7 bps to 3.59%
  • 10-yr: +3 bps to 3.58%
  • 30-yr: +1 bp to 3.88%

Prior auction results:

  • High yield: 3.920%
  • Bid-to-cover: 2.66
  • Indirect bid: 68.7%
  • Direct bid: 19.2%

Average results of previous 12 auctions:

  • High yield: 3.774%
  • Bid-to-cover: 2.59
  • Indirect bid: 71.4% 
  • Direct bid: 17.8%

Live From the Pit

From The TradersCommunity US News Desk