(Bloomberg) — Treasuries held steady after an auction of 20-year bonds was met with strong demand, a sign investors are willing to snap up longer-dated US government debt while rates remain high.
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Yields traded about four to five basis points higher as of early afternoon in New York, following the $13 billion sale. The benchmark 10-year note’s was trading near session highs of around 4.39% shortly after the 1 p.m. auction.
“The results are a small positive for the market,” said John Canavan, analyst at Oxford Economics.
The reopening of 20-year debt drew a yield of 4.935%, lower than indicated by pre-auction trading before the bidding deadline. That result showed demand was “quite strong,” Canavan said, noting the highest bid-to-cover ratio in more than a year.
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“The 20-year tenor has often been unloved thanks to poor liquidity. But it had no trouble finding suitors at Wednesday’s re-opening. It seems as if yields around 5% are once again proving attractive, though plenty of risks remain for the bond market through the end of next week.”
— Cameron Crise,Macro Strategist, Markets Live
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The auction shows “good demand around these levels” as 20- and 30-year yields approach 5%, said John Briggs, head of US rates strategy at Natixis Corporate & Investment Banking.
The auction allayed concern stoked during Asia trading hours when demand was weak for a sale of 40-year Japanese government bonds. The bid-to-cover ratio there was the lowest since 2011 and the 10-year yield jumped.
What’s more, European government bonds fell following reports that the US and EU were closing in on a trade deal that would impose 15% tariffs on imports from the continent. Yields on 10-year bonds from Germany, the UK and France were four to seven basis points higher on the day.
Despite the strong result for the 20-year bonds Wednesday, Canavan said he doesn’t expect a sustained support for the broader market.
Deal deadline
Hopes for trade deals ahead of an Aug. 1 deadline are mounting after the US reached an agreement with Japan that includes a 15% levy.
Secretary of the Treasury Scott Bessent sounded positive on the prospect in an interview on Bloomberg TV, saying talks with the EU are going better and negotiations are back on track with China. Secretary of Commerce Howard Lutnick said that Japan’s pledge of hundreds of billions in US investments “could be” a model for the EU.
