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Unexpectedly Strong 30-Year US Treasury Auction: Overseas Demand Soars to Record High
On Thursday, the U.S. Department of the Treasury auctioned 30-year Treasury bonds with a winning bid rate of 4.389%, which, although a significant increase from last month's 4.015% and the highest level since 4.405% in July this year, did not surprise the market.
The pre-auction yield for this sale was 4.404%, which was 1.5 basis points higher than the final winning bid rate, and there was no tail spread indicating weak demand, marking the first time since June that a 30-year U.S. Treasury bond auction did not have a tail spread.
The bid-to-cover ratio for this auction was 2.50, significantly higher than September's 2.38, reaching the highest level since June 2023, and well above the average of recent auctions.
As an indicator of domestic demand in the United States, direct bidders, including hedge funds, pension funds, mutual funds, insurance companies, banks, government agencies, and individuals, received only 7.6% of the allocation, the lowest since 2018.
As an indicator of overseas demand, indirect bidders, typically institutions such as foreign central banks participating through primary dealers or brokers, received an astonishing 80.5% of the allocation, soaring from last month's 68.7%, setting a historical high.
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As the "catcher" taking all un-purchased supply, primary dealers received an allocation of 12.2% in this round, the lowest level since July 2023, highlighting strong real demand.
Zerohedge commented:
If this week's 3-year Treasury bond auction was rated as poor, and yesterday's 10-year Treasury bond auction was unremarkable, then today's 30-year Treasury bond auction was absolutely stunning. In fact, it can be said that this is the strongest 30-year Treasury bond auction on record.
Although the Federal Reserve may indeed slow down the pace of easing in a few months, in the face of the massive U.S. debt, the Federal Reserve may ultimately have to more actively monetize U.S. debt.
U.S. Treasury yields rose to their intraday highs before the results of the 30-year Treasury bond auction were announced. After the auction results were released, U.S. Treasury yields fell by about 3 basis points, as the market was clearly surprised by the strong demand for long-term U.S. Treasury bonds.
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