In a vast understatement, the interest-rate strategists at BMO Capital Markets described the auction as “lackluster” in a note to clients. That’s an understatement because the poor auction sent yields for Treasuries of all maturities flying higher. Those on 10-year Treasuries — the global benchmark that helps determine borrowing costs for the government, businesses and consumers — rose to the highest since February, higher than the levels in early April that forced President Donald Trump to reverse course and soften his draconian tariff plan. Markets “were jumping a little bit out of line,” Trump told reporters at the time when asked why he backed off. “They were getting a little bit yippy, a little bit afraid.”
US government debt auctions are generally sleepy affairs — except when they’re not. And Wednesday’s sale by the Treasury Department of US$16 billion in 20-year bonds definitely qualified for the latter category. It’s unlikely to be the only one.
The offering was the government’s first auction of so-called coupon-bearing debt since Moody’s Ratings on Friday became the last of the three big creditassessors to strip the US of its top triple-A rating, following S&P Global Ratings in 2011 and Fitch Ratings in 2023. The auction was considered subpar on at least two critical measures, the amount of bids received from investors relative to the amount being sold, and the higher interest rate investors demanded relative to where the bonds were trading in the so-called when issued market before the sale.
