The U.S. Treasury auctioned $22 billion of 30-year bonds with a yield of 4.623%. At the time, the WI level was 4.612%, resulting in a tail of 1.1 basis points, contrasting with the six-month average of -0.1 basis points.
The bid-to-cover ratio stood at 2.37X, lower than the six-month average of 2.46X. Direct bids accounted for 22.7%, above the average of 18.7%, while indirect bids made up 60.5% compared to 68.4%.
Dealers accepted 60.9% of the auction, well above the six-month average of 13.6%. International demand remained weak at 60.5%, against the average of 68.4%. Currently, 30-year yields have decreased by 1.4 basis points to 4.616%.
Weaker Demand Observed
This auction showed weaker demand than we have recently seen, with buyers stepping back slightly. The tail of 1.1 basis points indicated the market was unwilling to take the full supply at prevailing WI levels, a shift from the usual slight premium seen in recent months. A bid-to-cover ratio below the average further reinforced this softer appetite.
A notable detail was the role of dealers, who took in significantly more than usual. At 60.9%, their absorption of the issuance was well beyond the typical 13.6% level. This suggests stronger reliance on dealers rather than end buyers, often a sign that immediate investor demand was not strong enough to clear the auction smoothly. Direct bidders, often including smaller institutions and hedge funds, showed up in greater proportions. However, indirect bidders—typically international investors and large institutions—participated at a noticeably lower percentage.
With international interest well below its six-month trend, this hints at reduced foreign appetite for longer-duration US debt. Whether this pattern continues will depend in part on how global capital shifts in response to rate expectations and broader economic conditions. The immediate reaction in secondary markets saw 30-year yields ticking down slightly. This suggests that while the auction was not met with overwhelming enthusiasm, it did not spark a dramatic repricing.
Market Implications Ahead
Movements in long-duration yields going forward will depend on how investors digest this result alongside upcoming inflation data and shifts in Federal Reserve policy expectations. If softer demand persists, it would likely translate into ongoing accommodation from dealers, which could influence positioning across rate derivatives and broader fixed-income markets.
