The six-month averages of the major components shows:
- Bid to cover: 2.42X
- Tail: +0.7 bps
- Directs (domestic demand): 18.0%
- Indirects (international demand) 67.4%
- Dealers :14.6%
The last auction yield came in at 4.535%
Vail Hartman and Ian Lyngen from BMO on the auction says:
Today's $22 bn long bond auction will offer another litmus test of the demand for duration as 30-year yields continue to press toward 5.0%. The auction is set to clear at a cheaper level than the October 2023 offering – which stopped at 4.837% with a 3.7 bp tail – making it the highest yielding 30-year auction in the post-GFC era. Not only is there a sizable outright concession, the ongoing underperformance of the long bond on the curve has added to the relative value case for 30-years compared to shorter-dated US debt. Despite what might appear to be an attractive valuation, the New Year's trading tone has left us skeptical that an aggressive bid for duration will come to fruition. The touchstone in this regard being fears of an inflationary start to Trump’s second presidency and the fact that it could be some time before the market has clarity on the economic implications of the incoming administration's policy agenda. All things considered, we'll look for a tail at 1pm EST.
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