Liz Capo McCormick and Michael Mackenzie
Updated 6 min read
In This Article:
(Bloomberg) — Global investor pushback against long-term government debt is turning what normally would be a routine US bond auction into one of the most anticipated events on Wall Street this week.
Most Read from Bloomberg
-
Where Public Transit Systems Are Bouncing Back Around the World
-
ICE Moves to DNA-Test Families Targeted for Deportation with New Contract
-
Trump Said He Fired the National Portrait Gallery Director. She’s Still There.
-
US Housing Agency Vulnerable to Fraud After DOGE Cuts, Documents Warn
The Treasury is set to sell $22 billion of 30-year government bonds on Thursday, part of its regularly scheduled borrowings. The results, though, will receive special attention because they will offer an instant readout on the scope of market demand at a time when investor appetite for 30-year US debt has soured.
“All the auctions will be viewed through the lens of a test of market sentiment,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. “It feels like US Treasury 30 years are the most unloved bonds out there.”
Yields on long-term global debt have soared in recent weeks as concern over spiraling debt and deficits led some investors to shun the securities and prompted others to demand a higher premium for the risk of lending to governments.
US 30-year yields touched a near two-decade high of 5.15% last month, and even at 4.94% as of Friday were still more than a half-point above levels seen as recently as March.
Higher yields mean funding pressure at a time when the US is borrowing more and government spending remains rampant. The House-passed version of President Donald Trump’s tax-and-spending bill is forecast by some to add trillions to US budget deficits in the years ahead. Moody’s Ratings lowered its credit score on the US last month.
“We are in a disturbing fiscal trend,” said Fred Hoffman, a former fund manager who turned to academia about seven years ago and is now a professor of finance at Rutgers Business School.
Hoffman said he’ll monitor the results of the auction next week while he’s at his vacation home in Martha’s Vineyard. Details such as the auction “tail” — where yields settle versus the when-issued level — and the extent to which orders exceed the amount of debt for sale will provide clues about demand. Foreign participation will also be in the spotlight.
“If this auction and the next auctions continue to break down with lousy tails and horrible bid-to-cover ratios, then we have problem,” said Hoffman, who discusses debt markets and mechanics in some of his class lectures.
