US treasury to auction off $22 billion of 30 year bonds the top of the hour

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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This article was written by Greg Michalowski at www.forexlive.com.