30-Year Treasury Long Bond Auction Brings Stability

US Treasury building
US Treasury building

The United States Treasury has just sold $13 billion in 30-year Treasury Bonds. This "long bond" auction was expected to be highly watched because of the recent rise in interest rates and with the sell-off that has been seen in so many of the "bond like stocks" that have high dividend yields in telecom, tobacco, consumer products, REITs, utilities and more. It looks as though the theory that "high yields cure high yields" applies today as demand was better than what we have been seeing in prior Treasury auctions this week. Some of the numbers will seem sub-par but the impact has been one of stability so far.

The Treasury bonds are actually 29-year and 11-month to maturity. Of the $13 billion accepted, some $32.09 billion was tendered. The 2.875% coupon went off at a 3.355% yield with an at-issue price of $90.978135. Its bid-to-cover ratio came to 2.47. This was the highest long bond auction yield since March of 2012 and the on-the-run 30-year Treasury yield is now 3.325%.

Primary dealers tendered for $20.6 billion and had only $6,662 billion in accepted bids for their own accounts. Direct bidders, the non-Primary dealer submitters bidding for their own house accounts were about $1.1 billion.

Indirect bidders, the barometer of foreign bank demand for Treasuries, was where al of the action was. While almost $8.6 billion was tenders (about 27% of the tendered amount), the amount accepted was $5.229 billion and that comes to just over 40% of the entire auction.

The 10-year Treasury yield has now dropped down to 2.17% as well for a drop of 6 basis points from yesterday. The S&P 500 Index is up 11 points and the DJIA is up about 85 points.

Filed under: 24/7 Wall St. Wire, Banking & Finance, Bonds, Dividends & Buybacks Tagged: featured