US Treasury Yields Edge Higher After Weak 20-Year Auction Demand

U.S. long-dated Treasury prices fell slightly on Tuesday after the 20-year Treasury auction cleared at a yield above pre-sale trading levels, while oil prices rose on supply risks. According to Sina Finance, the 10-year Treasury yield briefly reached 5.04% before easing back below 5% after 3:00 p.m. New York time. The 10-year yield later rose 1.7 basis points to 5.004% as of 4:32 p.m. U.S. Eastern Time, while the 2-year yield rose 1.6 basis points to 4.6734%, the 5-year yield rose 1.5 basis points to 4.8368%, and the 30-year yield rose 2.2 basis points to 5.3662%. The 5s30s spread widened about 0.7 basis point to 52.76 basis points, and the 2s10s spread widened about 0.3 basis point to 32.85 basis points. The $13 billion reopening of 20-year U.S. Treasurys cleared at a yield 2 basis points above the pre-sale yield, adding to afternoon steepening pressure on the U.S. yield curve. Bid data were weak, with the primary dealer take-up rising to 16.9%, the highest since February, while indirect bidder take-up fell to 52.5% and direct bidder take-up rose to 30.7%. In rate options, hedging demand increased around Wednesday's Federal Reserve decision, and the swaps market was almost fully pricing in a 25-basis-point rate hike. Short-term rate contracts also showed demand for upside hedges against a scenario in which the Fed leaves rates unchanged on Wednesday, with the market currently pricing about 23 basis points of tightening. The market also saw demand for short June 2027 SOFR straddles for a third straight session, with the trade having collected about $150 million in premiums.