US Treasury sells USD 25 bn worth of 30-year bonds at 5.046% yield amid strong foreign demand

Washington DC [US], May 15 : The US Treasury Department has sold USD 25 billion worth of 30-year government bonds at a high yield of 5.046 per cent, according to official Treasury auction results.

According to the auction results, the coupon rate, which refers to the fixed annual interest rate paid on the bond, was set at 5 per cent. However, the auction stopped at a slightly higher yield of 5.046 per cent, indicating that investors demanded slightly higher returns while purchasing the bonds.

The bonds have been issued for 30 years and will mature on May 15, 2056.

The total amount tendered in the auction stood at over USD 63.50 billion, while the total accepted amount was around USD 30.93 billion, including purchases by the Federal Reserve's System Open Market Account (SOMA).

The data shared by the department also highlighted that the auction attracted strong interest from indirect bidders, who are widely considered a proxy for foreign demand, including foreign central banks, sovereign wealth funds and overseas institutional investors.

Indirect bidders purchased around USD 16.6 billion worth of the accepted securities.

Meanwhile, direct bidders purchased around USD 5.42 billion, while primary dealers were allotted around USD 2.9 billion worth of securities.

The Treasury auction also recorded a bid-to-cover ratio of 2.30, meaning investor demand was 2.3 times the amount of bonds offered for sale.

The auction was conducted as part of the US government's regular borrowing programme through which it raises money to fund public spending and manage fiscal requirements.

Treasury auctions are conducted by the US government to borrow money from investors. In return, investors receive Treasury securities and earn interest over a fixed period. In this case, the government sold 30-year bonds, meaning investors lending money to the US government will receive interest payments for 30 years before the principal amount is repaid at maturity.

In bond markets, higher yields generally indicate that investors are demanding better returns for lending money, often due to inflation concerns, higher interest rate expectations or uncertainty in financial markets.

The results of Treasury auctions are closely watched globally because US Treasury securities are considered among the safest financial assets in the world and serve as benchmarks for borrowing costs across global markets.

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