Stellar 30-Year U.S. Treasury Bond Auction

Economy

Published: September 11, 2014 2:00 pm

The U.S. Treasury has conducted a 30-year Treasury bond auction and the results looked impressive. The news seems a bit surprising considering what has happened with a Ukraine-Russia ceasefire and a lack of horrific news out of the Middle East, but Europe and a potential for an independent Scotland from the United Kingdom are acting to keep demand up.

Thursday’s auction went off at a 3.24% yield, slightly under the on-the-run rate of 3.26% on the existing 30-year Treasury bond. One driving force may have been a recent bond sell-off, even if “bargain buying” and “3.24%” sound like they should not even be in the same sentence. Still, U.S. yields are very attractive when compared to Europe and Japan.

Another sign of strength was a 2.67 bid to cover ratio, implying that $2.67 worth of bids were submitted for every $1.00 accepted. Indirect demand (foreign investors) was 45.5% and direct bidding (U.S. banks and brokers) was up at 21.8%.

Thursday’s auction was ahead of next week’s FOMC meeting. This is a meeting where investors may start to get a first look at Fed-speak that does not include an “extended period” in the guidance for low rates.

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