(Bloomberg) — US Treasuries rose after an auction of 30-year debt drew solid demand as long-dated yields edge away from their highest levels in more than two decades.
The gains sent yields lower across maturities on Thursday, with those on 30-year bonds down by six basis points to 5.61% — off their highest levels since 2002. A $22 billion sale of the US government’s longest bond was met with good investor appetite, echoing this week’s strong 10-year auction.
“Demand held up,” said Molly Brooks, rates strategist at TD Securities. “It’s a good sign for those that want to dip their toes back in the long end.”
Longer-term debt from around the world has been selling off in recent months as angst has built up around the Iran war’s effect on energy costs and the fallout for inflation. Fiscal concerns have also added to the pressure, with 30-year Treasury yields knocking out a series of milestone levels as they surged in recent weeks.
On Thursday, however, they slid as President Donald Trump said in a social media post that he’d hold off on attacking Iran again until after the US midterms on Nov. 3. Long-dated yields extended their declines as oil prices fell from an earlier peak around $105 per barrel.
“There was a lot of rumbling about potential pre-midterm strikes, so this takes some pressure off near-term oil,” said Izaac Brook, US rates strategist at RBC Capital Markets. “This is just a near-term removal of Iran escalation tail risk.”
Short-end yields also pulled back. Two-year yields — which are more sensitive to the Federal Reserve’s path — were down to 4.75%.
Traders were pricing in a roughly 20% chance that the US central bank boosts interest rates later this month and are fully pricing in a move by year’s end.
Investors flocked to the Treasury Department’s sales of 10- and 30-year debt this week, a sign that yields lingering around multi-decade highs are enticing buyers.
The 30-year auction drew a yield of 5.618%, compared to the 5.617% when-issued yield at the 1 p.m. New York time bidding deadline. The 6.8% share of the sale that was awarded to primary dealers came in below the recent 10% average, a sign of investor appetite.
That sale was followed by a buyback in which the Treasury repurchased $6 billion of bonds maturing in 20 to 30 years. The purchase marked the fourth such operation since the department expanded the program.
To TD’s Brooks, yields appear to be finding some resistance levels that are leading in buyers.
“If we are able to see the rally hold for a few days, I think that would bring even more buyers back into the market that have been waiting for the greenlight,” Brooks said.
(Adds buyback results and updates prices.)
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