After today's stunning announcement by the Treasury it was doubling the size of long-end buyback operations to boost liquidity in the space, many were closely watching today's 20Y auction - which is viewed as the proximal catalyst to trigger Bessent's panic as it was going to price at the highest yield in the history of the 20Y auction - to see how much demand there was for this key paper. As it turns out: not a whole lot.
The auction priced at a high yield of 5.204%, up materially from 5.163% a month ago, and like in July today's auction tailed the When Issued by 0.5bps which is the first red light: despite today's massive intervention by the Treasury, demand was still at best lackluster.
But looking closer at today's 20Y yield moves, we can see why Bessent panicked: had he done nothing, today's high yield would have been the highest in 20Y history... and following the recent ugly 30Y auction, this is not what the bond market would have wanted to see. So to make sure the August 2026 auction priced inside the record high set in October 2023 with a 5.245% yielding auction, Bessent announced the buyback boost, which was enough to send 20Y yields 8bps lower, or enough to make today's auction yield the second highest on record.
The bid to cover of today's 20Y auction was 2.53, down from 2.64 in July and down sharply from 2.75% in June. It was also the lowest since February and one of the lowest on record.
The internals were also a mess: foreign buyers (Indirects) were awarded just 62.9%, down sharply from 69.1% and th
