For Trump’s Treasury, the sting is in the auction ‘tail’
TLT•The Treasury plans to sell nearly $120 billion in notes and bonds this week after weak September auctions, including a five-year sale with the largest tail since 2022. Yields on the upcoming maturities have risen about 35 to 50 basis points since their last auctions.
1. Auctions under scrutiny
The Treasury plans to sell $58 billion of three-year notes Tuesday, $39 billion of 10-year notes Wednesday and $22 billion of 30-year bonds Thursday. The sales follow weak auctions on September 22-24, especially the September 23 five-year sale, which helped spark the biggest rise in bond yields since April last year.
2. A record auction tail
Demand at the $70 billion five-year auction was the weakest in nine years by the bid-to-cover ratio. Treasury sold the notes at 5.033%, more than three basis points above the market yield at the bidding deadline—the largest tail for a five-year auction since June 2022.
3. Yields and demand
Three-year and 10-year yields are up around 50 basis points from their last auctions, to about 4.96% and 5.32%; the 30-year yield is up around 35 basis points to 5.65%. The article says Treasury auctions are unlikely to fail because primary dealers participate, but weak demand could mean higher borrowing costs and market volatility.
