The latest U.S. bond auction has concluded with the sale of $13 billion worth of 20-year bonds. The high yield rate tallied in at 4.942%, matching the when-issued (WI) yield and falling from the previous high yield of 5.047%. The high yield matching the WI yield indicates that demand was in line with supply and a falling high yield could signal lower rate expectations in the future.
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Furthermore, the bid-cover ratio was 2.68, up from 2.46. This ratio represents the dollar amount of bids received compared to the dollar amount of bonds sold, with a higher figure implying greater demand.
A Lower High Yield could Signal Falling Inflation
Direct bidders, a proxy for domestic buyers, totaled 19.9% of the auction, up from 14.1%. Indirect bidders, a proxy for foreign buyers, totaled 66.7%, down from 69%.
With a lower high yield, investors could be expecting lower inflation in the future. That could…
