The U.S. government on Thursday auctioned $25B in 30-year Treasury bonds (US30Y) at a yield of 5.216%, marking the highest rate for this tenor since 2001.
This quarter-century high underscores investors' growing demand for increased compensation to finance the nation's expanding fiscal deficit.
While the auction met with decent demand, there were clear signs of slight hesitation from buyers. The bid-to-cover ratio slipped to 2.39 from July’s 2.44, tracking below the recent average. Additionally, indirect bidding dropped to 66.9% from a near-record 77.7% in July. The final yield also landed slightly above prevailing pre-auction market levels, indicating that overall demand narrowly lagged expectations.
This comes a day after a 10-year Treasury (US10Y) auction that drew its highest financing costs since 2007.
The broader surge in long-term yields is heavily driven by investor anxiety that rising energy prices, fueled by conflict in the Middle East, will sustain inflation and force the Federal Reserve to keep interest rates elevated.
Meanwhile, 30-year yields (US10Y) dipped by roughly five basis points to 5.21% at press time, as cooling oil prices and tame producer price data prompted traders to scale back expectations for another Fed rate hike this year. Still, that's up from 4.85% at the start of the year.
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