Auction Preview: US to sell USD 22bln of 30-year bonds at 17:00GMT/13:00EDT

• High Yield: (prev. 4.750%, six-auction avg. 4.736%)
• Tail: (prev. -2.1bps, six-auction avg. 0.2bps)
• Bid-to-Cover: (prev. 2.66x, six-auction avg. 2.39x)
• Dealers: (prev. 5.9%, six-auction avg. 11.3%)
• Directs: (prev. 24.2%, six-auction avg. 23.3%)
• Indirects: (prev. 69.9%, six-auction avg. 65.4%)

The US will sell USD 22bln of 30-year bonds at a time of heightened market volatility amid the ongoing US/Iran conflict. Yields across the curve have risen since the start of the war as oil prices surged in response to the escalation in the Middle East, although moves have been more pronounced in the front end than the long end.

The 30-year yield has risen from 4.600% pre-war to a peak of 4.895%, but now trades at 4.879%, above the prior month's auction high yield of 4.750%.

There was a key development on Monday after US President Trump suggested the conflict could end soon, prompting a sharp reversal in crude prices. Brent crude fell from USD 119/bbl overnight on Monday to lows of USD 81/bbl. However, as the week has progressed tensions remain elevated and Brent has returned to just below USD 100/bbl at the time of writing.

Measures to offset the rise in crude, including a 400mln bbl SPR release, have failed to fully calm markets, with the releases spread across countries while the US is lending oil from its reserves with the intention of replenishing them at a later date - it is lending 172mln barrels and wants 200mln back within the year. 

The surge in oil has seen traders push back Fed rate cut expectations, with markets now pricing the first rate cut by December.

Meanwhile, corporate issuance had slowed as bond volatility increased, with issuers likely waiting for more stable conditions before entering the market. The MOVE index rose from 64 at the end of February to a peak of 81.25 last week, the highest level since November 2025 and well above the YTD low of 55.65.

However, after Trump's comments about ending the war on Monday, several issuers entered the market on Tuesday, marking the largest day on record for corporate issuance, supported by USD 25–30bln from Amazon (AMZN), USD 25bln from Salesforce (CRM) and USD 16bln from Honeywell (HON).

Given the elevated volatility backdrop, there is a risk of softer demand at today’s auction. This also follows a very weak 3-year auction and a relatively soft 10-year sale earlier in the week. However, with the longer end of the curve less sensitive than the front end to crude price movements, investors may prefer the longer-end auctions this week.

Meanwhile, 30-year yields are currently above the level seen at the previous offering, which could help support demand, with long bonds trading at their cheapest levels since January.

Another factor to consider is Amazon’s bond sale, which reportedly saw over USD 125bln of orders, highlighting strong demand for fixed income. However, the 30-year corporate tranche was initially marketed around 105bps over the 30-year Treasury yield. Given the size and credit quality of Amazon, some investors may prefer the additional spread offered in the corporate market. Salesforce (CRM) also issued a 30-year bond at around 170bps over Treasuries.

Amid heightened redemptions from credit funds recently, stress in private credit markets could drive incremental demand for Treasuries as investors rotate into higher-quality and more liquid assets. 

Alongside geopolitical tensions, participants are also increasingly wary of a slowing labour market following the weak February NFP report, which raised questions about the recent stabilisation in employment. On prices, February CPI came in line with expectations, although yields still rose with analysts highlighting firm PCE components within the report.

This week also sees the release of the January PCE data, which could add further volatility. However, given the market's current focus on oil prices and geopolitical developments, the data may be viewed as somewhat stale as it will not yet reflect any inflationary impact from the conflict, although it will still be closely watched by bond traders.