Treasuries largely maintained gains that drove long-maturity yields to their lowest levels since April, following a strong auction of 20-year bonds. The $US13 billion auction, representing the second and final reopening of the 20-year bond introduced in August, was awarded at 4.506 per cent. This rate is more than one basis point lower than its yield in pre-auction trading just before the 1pm New York time bidding deadline, indicating significant investor demand as they accepted a lower-than-indicated yield.
The auction outcome reinforces the Treasury market’s prevailing trend of decreasing yields throughout the month. This trend is influenced by factors such as the ongoing US government shutdown and renewed trade tensions between the US and China.
Tony Farren, managing director in rates sales and trading at Mischler Financial Group, noted that there is genuine underlying demand for Treasuries currently. This demand is stemming from the government shutdown, trade tensions, and a slight improvement observed in the federal deficit trend.
Demand for Treasuries has also been bolstered by several high-profile bankruptcies, despite US equity benchmarks reaching all-time highs and investment-grade credit spreads hitting generational lows.
