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…
owing 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.