20-year U.S. Treasury auction yield may hit a record high

The 20-year U.S. Treasury reopening auction scheduled for 1 p.m. New York time is expected to record the highest auction yield for this tenor since issuance was restarted in 2020. A modest bear-steepening selloff in the long end of the bond market has helped push yields higher. This $13 billion reopening, with a when-issued yield of about 5.41%, would surpass the record 5.245% set on October 5, 2023, marking an all-time high for the tenor. Last week's coupon auctions drew strong demand at elevated yield levels, a potential positive for this 20-year auction. The 20-year Treasury yield touched as high as 5.44% on Tuesday, the highest since the tenor was reintroduced. At last week's 10-year and 30-year U.S. Treasury auctions, bid-to-cover yields were 1.4 basis points and 2.7 basis points below the issuance yields, respectively. JPMorgan strategists noted in a Monday evening research report that an unattractive macro backdrop, rich valuations and insufficient technical support mean the auction will require a larger yield concession to clear smoothly. The latest CFTC positioning data show speculators hold a net short position of 200,000 traditional Treasury futures contracts, which could generate short-covering demand.