Signs of Weak Demand Reappear: 30-Year US Treasury Auction Yield Hits Highest Level Since 2001
The day before the auction of 30-year US Treasury bonds, the winning yield of the 10-year US Treasury bonds reached a new high since the 2007 financial crisis, and there was a "tail" phenomenon where the winning yield was slightly higher than the pre-auction yield, signaling weaker-than-expected demand. Although this does not indicate a systemic collapse in demand for US Treasuries, it reflects that US Treasury bonds are facing dual challenges of supply and cost.
Signals of pressure on demand for long-term US Treasuries are strengthening.
On Thursday, the US Treasury auctioned $25 billion of 30-year Treasury bonds, with the winning yield rising to 5.216%, the highest since 2001. At the same time, the auction saw the so-called "tail" where the winning yield was higher than the pre-auction yield, meaning investors demanded a higher yield to take on these Treasuries, indicating demand was slightly below market expectations.
Before the results were released, the 30-year Treasury yield in the secondary market had dropped by about 5 basis points intraday on Thursday. After the release, the yield's decline narrowed slightly, and the yield curve became steeper. The spread between 5-year and 30-year Treasury yields widened, staying at the widest intraday range since May.
This is already the second consecutive long-term Treasury auction by the US Treasury this week where the winning yield hit a multi-year high. On Wednesday, the Treasury completed a $42 billion 10-year auction, where the winning yield hit the highest level since the 2007 global financial crisis, also slightly above the pre-auction yield.
Two consecutive auctions at historically high yield levels highlight that the market's capacity to absorb long-term Treasuries is being tested at a time
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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