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on tuesday, september 17, the u.s. treasury auctioned $13 billion of 20-year treasury bonds on the eve of the federal reserve's september interest rate decision. overall, the auction results were poor, with demand far below expectations.

the winning rate of this auction was 4.039%, and it was 4.160% on august 21. the pre-issuance rate of this auction was 4.019%, 2 basis points lower than the final winning rate. the tail spread of 2 basis points was the largest since the disastrous auction in february this year. in february, the tail spread reached 3.3 basis points, setting a record. after that, there was no tail spread reflecting weak demand for 6 consecutive times, but the tail spread appeared again in this auction.

the bid-to-cover ratio for this auction was 2.51, the lowest since february and down from 2.54 the previous time. the average for the last six auctions was 2.68.

direct bidders, a measure of domestic demand in the united states, including hedge funds, pension funds, mutual funds, insurance companies, banks, government agencies and individuals, were allocated 16.3%.

indirect bidders, an indicator of overseas demand, which are usually foreign central banks and other institutions that participate in bidding through primary dealers or brokers, received an allocation ratio of 65.1%, a sharp drop from 71% last month and the lowest level since the dismal february auction.

as the "buyers" who take over all unpurchased supplies, primary dealers were allocated 18.6% this round, about twice the 9.7% last month, the highest since february, indicating weak real demand.

financial blog zerohedge commented that overall, this was a very bad auction and could easily become the second worst 20-year u.s. treasury auction in 2024. the market responded appropriately, and the 10-year u.s. treasury yield rose to an intraday high after the auction results came out.

it should be noted that the market demand for 20-year u.s. bonds is usually far less than that of 10-year and 30-year bonds, and liquidity is traditionally poor. even former u.s. treasury secretary mnuchin, who launched this bond, said last month that it was time to end the 20-year u.s. bond.