US sells $25bn 20-year bonds to tepid demand

The Treasury Department saw soft demand for a record $25 billion sale of 20-year bonds on Wednesday, though the auction went better than a weak 30-year bond auction that rattled the market last week.

The bonds sold at a high yield of 1.185%, which was around one basis point higher than where the debt was trading before the auction. The bid-to-cover ratio was 2.26 times.

"It was a pretty weak auction," said Kim Rupert, senior economist at Action Economics in San Francisco. "I think it was mainly some inflation jitters and the fact that we didn't see any backup in the 20-year yield in the last couple of days."

Treasury yields jumped to seven-week highs last week as the Treasury sold an unprecedented $112 billion in three-year, 10-year and 30-year debt. They have fallen this week, which makes them less attractive to some buyers.

The Federal Reserve, meanwhile, is expected to indicate in the coming months that it will allow inflation to run higher than previously expected before raising rates, which is making some investors wary of long-dated US debt.

The Treasury has been increasing the size of its auctions across the curve as it finances stimulus meant to blunt the economic impact of the coronavirus pandemic.