- High yield: 5.204%
- WI level at the time of the auction 5.199%
- Tail 0.5 bps
- Bid-to-cover ratio 2.53X
- Direct (domestic buyers) 24.59%
- Indirect (international buyers) 62.93%
- Dealers 12.49%
The US Treasury sold $18 billion of 20-year bonds at a high yield of 5.204%, with the auction showing a somewhat soft demand profile despite today’s earlier announcement that Treasury would at least double the size of its long-end liquidity-support buybacks.
The auction tailed by 0.5bp, with the high yield coming in at 5.204% versus a 5.199% when-issued yield immediately before the auction. A tail generally indicates that investors demanded a slightly higher yield than the market had anticipated, making this a modestly weak result. The bid-to-cover ratio came in at 2.53x, below the roughly 2.66x six-auction average. International buyers took 62.93%, almost 3 percentage points below the recent average, while dealers absorbed a larger-than-usual share of the issue.
Earlier today, the Treasury announced that it would at least double the size of its liquidity-support buybacks for longer-dated securities from $2 billion to $4 billion per operation, prompting a sharp rally in long-dated Treasuries. The 30-year yield briefly fell almost 10bp following the announcement.
One might therefore have expected the announcement to generate stronger demand for today’s 20-year auction. Instead, the auction still tailed by 0.5bp. That suggests that while Treasury’s announcement provided a short-term boost to the secondary market, it did not completely eliminate investors’ concerns.
This article was written by Giuseppe Dellamotta at investinglive.com.