Bond market passes key test as 20-year Treasury auction lures strong demand

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Vivien Lou Chen is a Markets Reporter for MarketWatch. You can follow her on Twitter @vivienlouchen.

Treasury’s $13 billion auction of 20-year government bonds on Wednesday, seen as a key test of investor demand, came in stronger than expected, which in turn led to a less-pronounced selloff of long-dated government securities in general during the New York afternoon.

The 30-year Treasury yield BX:TMUBMUSD30Y slipped back below 5% following the auction, after having pierced that level Wednesday morning. The benchmark 10-year yield BX:TMUBMUSD10Y, which touched an intraday high of 4.93%, traded around 4.89% after the 20-year bond sale. “Greater supply in general of Treasury issuances and the Fed’s QT have been the drivers of the selloff in long-dated Treasurys and one of the triggers for bear steepening,” said Daniel Tenengauzer, a New York-based strategic adviser for the financial technology firm called bondIT. Bear steepening refers to a trading environment in which long-term rates are increasing at a faster rate than short-term ones.

 

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