The U.S. Treasury saw another slump in demand for its latest benchmark bond auction Monday as the government continues to boost it overall bond sales and investors eye a key inflation reading later in the week.
Investors placed bids worth $137.2 billion for the $54 billion in paper on offer at a yields 4.887%, a level that represents a so-called bid-to-cover ratio, a key demand indicator, of 2.54. That’s down notably from the 2.64 bid-to-cover ratio recorded at the late October auction when the yield was pegged at 5.055%.
Today’s rate of 4.877% should have made the sale more attractive to investors, given that the entry price would be lower, but primary dealers in the Fed’s auction system ended up buying around 18.76% of the issue, up more than a percentage point from October and the highest total since April.
Foreign investors were also reluctant, according to auction data, taking down just 57.38%, down from 66.86% at the prior sale.
A $55 billion sale of 5-year notes is slated for later in the session.
The Treasury unveiled its new auction schedules and sizes earlier this month, as part of its broader effort to fund the government’s record $1.7 trillion deficit. The auction sizes themselves are the largest since 2021.
The update followed a cut to its current quarter borrowing forecast to by $76 billion, to $776 billion, amid what it called better-than-expected tax receipts from the resilient domestic economy, some of which were deferred as part of disaster relief efforts in California.
Benchmark 2-year notes were last seen trading at 4.918%, around 4 basis points higher from pre-auction levels, while 10-year notes eased to 4.435%.
The Bureau of Economic Analysis will published its October inflation report Thursday, with investors looking for the Federal Reserve’s preferred gauge, the core PCE Price Index, to ease 20 basis points to an annual rate of 3.5%.
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