Treasury 30-Year Auction Ends Weekly Issuance on a Disappointing Note
the Treasury concluded its weekly round of coupon issuance with a lackluster thirty-year auction that sent yields climbing to their session highs. The latest sale involved a $22 billion reopening of thirty-year notes, specifically the 29-year and 11-month cusip UE6, which came with a high yield of 4.535%. This figure marked a slight decline from last month's 4.608%, yet it tailed the When Issued rate of 4.523% by 1.2 basis points, marking the first tail since September and following two consecutive auctions that managed solid stop-throughs.
The Bid-to-Cover ratio for the auction proved underwhelming. In contrast to the stellar ten-year auction the previous day, which boasted impressive participation, the Bid-to-Cover ratio for the thirty-year auction settled at 2.39 times, a notable drop from the prior 2.64 times. This marked the lowest level since September and fell short of the six-auction average of 2.43 times, reflecting diminished enthusiasm among bidders.
Analyzing the internal metrics of the auction reveals a mixed performance. Indirect bidders, which typically include foreign central banks and institutional investors, were allocated 66.5% of the total. While this represented an improvement from November's 62.7%, it remained below the recent average of 67.7%, signaling tepid demand from this key investor group. Direct bidders, which often encompass domestic institutions, claimed 19.1% of the offering, a substantial drop from the prior 27.1% recorded in November. As a result, primary dealers were left with 14.4% of the issuance, the highest share since September. This pattern highlights a reduced appetite from both indirect and direct bidders, leaving dealers to absorb a larger-than-usual portion of the supply.
The overall reception of this auction was far from favorable. Viewed in isolation, it likely deserves a C-rating at best. The broader market's reaction echoed this sentiment, as yields on ten-year Treasury notes rose in response to the results. Yields climbed 2 basis points from 4.29% at the time of the auction to 4.31% shortly afterward, with subsequent trading activity pushing yields even higher, settling above 4.32% at session highs. The upward drift in yields underscores the market's disappointment and the dampened investor demand reflected in the auction results.