Auction Preview: US to sell USD 13bln of 20-year bonds at 18:00BST/13:00EDT

The US Treasury will auction USD 13bln of 20-year bonds, following a strong March reopening which saw a 0.7bps stop-through, with demand driven by a surge in indirect bidders more than offsetting softer direct participation.

The 20-year yield currently trades at 4.863%, above both the prior high yield of 4.817% and the six-auction average of 4.723%, offering more attractive outright levels which could help draw demand, particularly from investors who were underweight at the previous auction.

However, recent auction dynamics present a mixed backdrop. In March, demand improved further out the curve, whereas April supply has shown the opposite pattern, with strong front-end demand (3-year), a more balanced 10-year, and a soft 30-year auction. If this reversal persists, it raises the risk of weaker demand at today’s 20-year offering.

On the supportive side, volatility has moderated, with the MOVE index at 70 versus 79 at the time of the March auction, while President Trump’s extension of the ceasefire has helped ease some geopolitical uncertainty.

Overall, while higher yields and lower volatility may support demand, recent softness in longer-dated supply leaves risks skewed towards a weaker result, particularly if investors favour the front-end ahead of next week’s 2-, 5-, and 7-year supply.

US 20-YEAR BOND AUCTION RECENT HISTORY:

• High Yield: (prev. 4.817%, six-auction avg. 4.723%)
• Tail: (prev. -0.7bps, six-auction avg. -0.1bps)
• Bid-to-Cover: (prev. 2.76x, six-auction avg. 2.63x)
• Dealers: (prev. 9.2%, six-auction avg. 11.2%)
• Directs: (prev. 21.6%, six-auction avg. 25.9%)
• Indirects: (prev. 69.2%, six-auction avg. 62.9%)