Woeful 30-year Treasury Bond Auction with Record 5.3 bps Tail Completes Week’s Offerings

U.S. Treasuries trading to new lows after the U.S. Treasury completed this week’s note and bond auction offerings with a $24 bln 30-yr bond reopening, which met woeful demand. Longer tenors led a slide that sent yields on 10s and 30s back to this week’s highs while yields on shorter tenors hit their highest levels in a week. Today’s $24 bln 30-yr bond auction met much weaker demand than sales of 3- and 10-yr notes over the past two days. Today’s offering tailed by a record 5.3 bps with the lowest bid-to-cover ratio in nearly two years and lowest indirect takedown in two years. The sale drew a high yield 4.769% with the bid-to-cover ratio (2.24x vs 2.39x average) and indirect takedown (60.1% vs 68.6% average) below their respective prior 12-auction averages. Today’s sale makes for a poor finish to this week’s issuance.

The Fixed Interest desk rated it a D- after this week’s completed $35 bln 10-yr note sale and $44 bln 3-yr note sale


The market fell to lows in immediate reaction to the poor sale, however the long bond climbed off its low in late trade while shorter tenors bounced briefly, but eventually fell to fresh lows after Fed Chairman Powell repeated during a public appearance that the FOMC would not hesitate to raise rates again if additional tightening becomes warranted.

Today’s selling lifted yields on 5s, 10s, and 30s back above their respective 50-day moving averages while the 2-yr yield stopped a couple basis points short of the 50-day moving average of its own. Crude oil snapped a two-day skid while the U.S. Dollar Index rose 0.3% to 105.95, reclaiming its 50-day moving average (105.80) in the process.

Yields at close

  • 2-yr: +8 bps to 5.01%
  • 3-yr: +8 bps to 4.77%
  • 5-yr: +12 bps to 4.64%
  • 10-yr: +11 bps to 4.63%
  • 30-yr: +12 bps to 4.78%

Auction Highlights

  • Duration: 30 Years
  • Amount:  $24 billion
  • High yield 4.769%
  • WI level at time of auction (When-Issued: 4.716%)
  • Tailed when-issued yield by 1.4 bps
  • Bid to cover 2.24X vs 2.39X 12-month average
  • Directs (a measure of domestic demand) 15.2% vs 19.2% 12-month average
  • Indirect (a measure of international demand) 60.1% vs 68.6% 12-month average
  • Dealers (they take the rest) 24.3% vs. 11.7% 12-month average

Auction grade: D

Yields after the auction.

  • 2-yr: +5 bps to 4.98%
  • 3-yr: +6 bps to 4.75%
  • 5-yr: +11 bps to 4.64%
  • 10-yr: +13 bps to 4.65%
  • 30-yr: +17 bps to 4.82%

The Auction came after the August CPI release for the U.S.

Yields ahead of the auction.

  • 2-yr: +2 bps to 4.95%
  • 3-yr: -1 bp to 4.68%
  • 5-yr: +3 bps to 4.55%
  • 10-yr: +2 bps to 4.54%
  • 30-yr: +4 bps to 4.69%

Prior auction results:

  • High yield: 4.837%
  • Bid-to-cover: 2.35
  • Indirect bid: 65.1%
  • Direct bid: 16.7%

Average results of previous 12 auctions:

  • High yield: 3.944%
  • Bid-to-cover: 2.39
  • Indirect bid: 68.6%
  • Direct bid: 19.2%

This Week’s Other Treasury Auctions

  • High yield: 3.869%
  • Bid-to-cover: 2.39
  • Indirect bid: 68.9%
  • Direct bid: 19.3%

Live From the Pit

From The TradersCommunity US News Desk