Auction Preview: US to sell USD 22bln of 30-year bonds at 18:00BST/13:00EDT

Auction History

• High Yield: (prev. 4.871%, six-auction avg. 4.745%)
• Tail: (prev. -0.7bps, six-auction avg. -0.3bps)
• Bid-to-Cover: (prev. 2.45x, six-auction avg. 2.42x)
• Dealers: (prev. 9.4%, six-auction avg. 9.9%)
• Directs: (prev. 27.2%, six-auction avg. 24.0%)
• Indirects: (prev. 63.4%, six-auction avg. 66.0%)

Preview

The 30-year auction comes amid a shift in demand dynamics, with April supply so far showing stronger participation in the front-end compared to March, where demand was more concentrated further out the curve. This raises the risk of a softer outcome for today’s long-end issuance.

The 3-year auction earlier in the week was notably strong, driven by a surge in indirect demand, while the 10-year saw a rotation back towards direct bidders with more balanced participation. This suggests demand may be redistributing across the curve, rather than following the long-end strength seen last month.

While yields and volatility are broadly in line with levels seen at the time of the March 30-year auction, which could offer some support, this may be offset by the apparent shift in demand towards shorter maturities.

The 30-year yield currently trades around 4.892%, slightly above the March high yield of 4.871% and above the 4.745% six-auction average. Meanwhile, the long-end has been relatively less volatile than the front-end, as the recent decline in oil prices following the US/Iran ceasefire has driven a bull steepening in the curve.

The MOVE index has declined from March highs near 115 to around 78, reducing overall volatility, although it remains broadly in line with levels seen at the time of the prior 30-year auction.

Overall, while the level of yields and volatility may provide some support, the shift in demand towards the front-end suggests the risk of a softer 30-year auction relative to earlier supply this week.