Another Poor, Tailing 20Y Auction: Is This One Of The Last Ones

The week’s lone coupon auction took place at 1pm and amid speculation of fireworks at the next Treasury Refunding Announcement in two weeks, when Citi is confident Bessent could announce the end of 20Y auction, it could very well be one of the last sales of 20Y paper for the US.

The auction, as most recent 20Y sales, was mediocre: it stopped at a high yield of 5.469%, the highest on record for the tenor, up 49bps from September, and tailed then When Issued 5.460% by 0.9bps, the 4th tail in a row (if modestly better than the 2bps tail last month).

The bid to cover was 2.73, a solid improvement from 2.57 a month ago, and the highest since June. It was also above the recent average of 2.62.

The internals were less good: To offset the continued weakness in foreign demand, with Indirects taking 58.2%, up from last month’s 52.5%, but below the recent average of 65.2%, Directs surged to a record 31.6%, up from 30.7% in September. That left Dealers with just 10.3%, low but not the lowest on record, with at least 4 single-digit Dealer auctions earlier this year. 

Overall, just another mediocre 20Y auction which continues to trade as an “oversight” hump on the yield curve, which amid this continued lack of investor euphoria could very well spell the end of this particular dot on the yield curve if Bessent pulls the plug next month.