Yields Slide After Stellar 30Y Auction, But Then Blow Out Again

With global markets in chaos in the aftermath of the Trump victory - and what appears to be a Republican sweep - and bond yields soaring by the most since the covid crisis, some were worried that today's 30Y auction would be a historic disaster and may even fail, as technically improbable as that may be. In the end, with 30Y yields blowing out by more than 20bps, the biggest rout since 2020, such fair proved to be groundless because today's sale of $25BN in 30Y paper ended up being very solid for the most part.

The auction, the last of the quarterly refunding trio, priced at a high yield of 4.608%, up from 4.389% last month and the highest since May's 4.635%, but stopped through the When Issued 4.638% by 2.2bps, the biggest stop through since Dec 2020, although a lot of that has to do with the massive concession into today's auction.

The bid to cover was a remarkable 2.642, up huge from 2.495 in October, above the 2.40 recent average, and the highest since Jan 2018.

The internals however were more problematic, with Indirects awarded 62.7%, down from 80.5% last month and the lowest since July. To fill the gap, Direct Bidders ended up taking a whopping 27.1%, up almost 4x from 7.4% in October and the third highest on record. This left just 10.2% for Dealers, who took down the lowest amount since June 2023.

Overall, this was a very solid auction and clearly one which had plenty of demand at a clearing yield well inside the stop through, which is also why yields dropped almost 5bps on the auction. However, since nothing has really changed fundamentally and since the market will now focus very closely on the budget deficit, the grind higher in yields has resumed and the entire rates complex is back near session wides.