A $13 billion sale of 20-year Treasury bonds clears at a higher yield as reports split on demand

The US Treasury sold $13 billion of 20-year bonds on Wednesday at a high yield of 5.469%⁵.

That compared with a high yield of 5.420% at the previous sale of the same maturity^5,6. The auction tailed by 0.9 basis points⁵.

Last month’s sale was also $13 billion and drew a bid-to-cover ratio of 2.57⁴.

The sale was held at 18:00 GMT and had been billed in advance as another test of demand for US government debt⁷. Treasury yields were steady on the day as investors awaited jobless claims and mortgage data⁹.

How demand was read

Accounts of the auction diverged. One market report said the sale showed softer-than-expected demand³, and another described demand as softer². A third report said the auction attracted above-average demand⁴.

A separate assessment said demand was not all that strong, but that the result drew little reaction in the market¹.

That assessment contrasted the sale with the 10-year and 30-year auctions earlier this month, when buyers, especially those abroad, showed up in force¹.

The higher clearing yield and the tail are consistent with the softer reading⁵. The reports do not set out in full the yardsticks behind their descriptions, so the split is partly a matter of what each compared the result against^3,4.

Why it matters to investors

The auction was framed beforehand as a test of how readily markets absorb US government debt⁷. A clearing yield nearly five basis points above last month’s, at roughly 5.47%, shows the price the Treasury is now paying to place 20-year paper^5,6.

The muted market reaction indicates that investors did not treat the result as a shock, and yields held steady on the day^1,9. The strong foreign buying at the 10-year and 30-year sales earlier in the month is the main evidence on the other side of the ledger¹.

The figures to compare at the next long-dated auctions are the high yield, the size of any tail and the bid-to-cover ratio, which stood at 2.57 for last month’s 20-year sale^4,5. A run of results like Wednesday’s, rather than a single sale, would be needed to show a lasting change in demand^1,3.