Preview: US to sell USD 16bln of 20-year bonds at 18:00BST/13:00EDT

Auction History

• Tail: (prev. -0.9bps, six-auction average -0.1bps)
• High Yield: (prev. 4.883%, six-auction average 4.786%)
• B/C: (prev. 2.68x, six-auction average 2.62x)
• Dealer: (prev. 9.7%, six-auction average 11.1%)
• Direct: (prev. 22.9%, six-auction average 25.4%)
• Indirect: (prev. 67.4%, six-auction average 63.5%)

Preview

The 20-year yield currently trades at 5.182%, well above both the prior auction’s 4.883% high yield and the 4.786% six-auction average, offering investors some of the highest outright yield levels since mid-2025 and potentially attractive valuation heading into today’s auction.

However, unlike the previous 20-year offering, volatility has increased notably, with the MOVE index currently trading around 85 versus roughly 70 at the time of the prior auction. The higher volatility backdrop may temper demand despite the more attractive outright yield on offer.

The April auction was strong overall, stopping through by 0.9bps as indirect demand rose above average and dealers were left with a below-average takedown. However, direct demand remained subdued, suggesting domestic real money accounts stayed somewhat cautious despite the broader improvement in demand.

The geopolitical backdrop also remains highly uncertain, with markets continuing to monitor whether President Trump ultimately resumes military action against Iran should negotiations fail. Elevated oil prices continue to support inflation expectations and pressure Treasuries across the curve, particularly in the front-end and belly where Fed pricing remains sensitive to energy-driven inflation risks.

Recent US inflation data has also reinforced concerns around broader price pressures, with both CPI and PPI reports showing firm underlying inflation and sticky services prices. Meanwhile, Fed rhetoric has increasingly shifted away from easing bias discussions and towards inflation risks, helping drive a notable hawkish repricing in rates markets. Money markets are now pricing around 16bps of tightening by year-end, implying roughly a 64% probability of a 25bp hike by December.

Overall, the auction benefits from attractive outright yield levels, but the combination of elevated volatility, persistent inflation concerns, and geopolitical uncertainty may limit the extent of demand improvement versus the prior solid offering.