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    Treasury's 20-year bond auction clears at 5.469%, the highest for the maturity since its 2020 return

    The $13 billion sale tailed slightly as foreign-linked demand slipped and direct bidders stepped in, a week before the Fed's next decision.

    HedgeWeekly News Desk ·

    The US Treasury sold $13 billion of 20-year bonds on Wednesday at a high yield of 5.469%, up from 5.420% at the September sale. The result, released at about 1 p.m. New York time, was 0.9 basis point above the 5.460% when-issued level, a wider tail than the recent average of 0.2 basis point.

    Overall demand held up: bids covered the offering 2.73 times, above the 2.62 average. The mix shifted, though. Indirect bidders, a category that includes foreign central banks, took 58.2% against an average of 65.2%, while direct bidders took 31.6%, well above their 22.9% average. Primary dealers were left with 10.3%, below the usual 11.9%, and one market commentary graded the sale a C.

    The clearing yield extends a steady climb at the tenor this year. The 20-year auction cleared at 5.163% in July and 5.204% in August before September's 5.42% sale, which was then the highest since the bond was reintroduced in March 2020. In the secondary market the benchmark 10-year yield stood at about 5.11% in late morning New York trading on Wednesday.

    Why it matters: long-end supply is clearing, but only at ever-higher yields, which keeps pressure on equity valuations, mortgage rates and the cost of leverage for rates-sensitive strategies. The thinner indirect share is the detail to watch for signs of softer overseas demand, with a $26 billion 5-year TIPS sale due on Thursday and the Fed's policy decision on October 28. History is a reminder that peaks can turn: the previous record 20-year auction, at 5.245% in October 2023, was followed by a roughly 130-basis-point fall in the bond's yield over the next 11 months.

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