The US Treasury is set to auction $25 billion in 30-year bonds today, following yesterday's 10-year auction that saw a substantial 3.0 bp tail. Analysts at BMO suggest caution as the last four instances of a 10-year auction tailing by at least two basis points were followed by tails in the subsequent 30-year auctions.
Since 2010, only 29% of long-bond refundings have managed to stop-through when the preceding 10-year new issue tailed by at least a basis point.
On the positive side, duration has been well-received this year with out two tails at 30-year sales and reopenings.
August has historically been a challenging month for 30-year supply, with no stop-through observed since 2014. The recent rise in market volatility and macro uncertainty could also dampen bidding enthusiasm.
The auction results are due out at 1 pm ET.
