US 20-Year Bond Sale to Test Demand as Yield Curve Steepens

(Bloomberg) — The sale of 20-year government bonds this week will test investor appetite for long-term debt following a few record-breaking auctions.

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The Treasury Department is slated to sell $16 billion of 20-year debt on Wednesday. In the when-issued market, where securities are traded before an auction, the new bonds were indicating at a yield of around 5.27% as of Friday. If realized, that would mark the highest yield for the tenor since it was reintroduced in 2020, revealing investors are demanding a higher payout to buy the debt amid concerns over inflation and government spending.

Last week, reports on consumer and producer prices fell within market expectations, prompting traders to pare wagers on the Federal Reserve raising interest rates in September. Yields for short-term debt — which are most sensitive to monetary policy — declined as long-term bond yields rose, mirroring investors’ increased compensation demands to finance the nation’s growing deficit.

Yields on the 20-year bond traded around 5.25% on Friday as the yield curve steepened.

The upcoming auction follows last week’s 30-year and 10-year debt sales. The former commanded the highest interest rate in a quarter century and the latter logged the highest yield for that tenor since 2007.

What to Watch

Economic data:
- Aug. 17: Empire manufacturing; NAHB housing market index; Total net and net long-term TIC Flows
- Aug. 18: ADP weekly employment change; New York Fed Services Business Activity; Import and export price indexes; Housing starts; Building permits; Industrial and manufacturing production; Capacity utilization; Pending home sales
- Aug. 19: MBA mortgage applications
- Aug. 20: Philadelphia Fed Business Outlook; Initial jobless claims; Continuing claims; Leading index
- Aug. 21: Bloomberg August US Economic Survey; S&P Global US manufacturing, services and composite PMIs
Fed calendar:
Auction calendar:
- Aug. 17: 13-, 26-week bills
- Aug. 18: 6-week bills
- Aug. 19: 17-week bills; 20-year bonds
- Aug. 20: 4-, 8-week bills; 30-year TIPS reopening