20Y Bond Auction Preview: Post-FOMC Duration Test

Treasury auctions 20Y Bond today at 1130ET, offering $13B in a re-open (CUSIP: 912810TW8).

• This is the first Coupon auction since the December FOMC meeting sparked a significant Treasury rally, and the last of the week on account of holidays.
• The November 20Y sale traded through for the 5th time in 7 auctions, by 1.0bp (high yield 4.780%), on bid-cover 2.58x, and primary dealers taking down 9.51% / indirects 73.98% / directs 16.51%. That sale broke a streak of tails across four consecutive auctions (3Y, 7Y, 10Y, 30Y).
• The 5-auction averages for the 20Y show a trade-through of 0.2bp (range of 1.2bp tail in Aug to 1.2bp trade-through in Oct), with bid-cover ratio of 2.63x, primary takeup of 10.3%, indirects taking 69.9% and directs 19.8%.
• The 20Y is trading with less of a concession than in November, both in absolute terms (yields down 57bp since then and about 29bp from pre-FOMC), and from a relative value perspective.
• The 20Y outperformed on the curve in early Dec, with the 10s-20s-30s fly falling from close to 56bp at the time of the November auction to just under 40bp for the first time since March 2023 - that's since retraced to 47bp, but still toward the rich end of the range it had been trading in for most of the Mar-Sep 2023 period.

  	High yield	When-issued yield	Trade through (tail)	High - Median Spread	Bid-to-cover	Primary Dealer Percent	Indirect Percent	Direct Percent	Offering Amount
  5-Auction Avg	4.630%	4.633%	0.2	6.1	2.63	10.33%	69.88%	19.79%	14
  20-Nov-23	4.780%	4.790%	1.0	5.0	2.58	9.51%	73.98%	16.51%	16
  18-Oct-23	5.245%	5.257%	1.2	5.9	2.59	11.93%	72.87%	15.20%	13
  19-Sep-23	4.592%	4.592%	0.0	5.4	2.74	9.27%	65.36%	25.36%	13
  23-Aug-23	4.499%	4.487%	-1.2	7.2	2.56	11.35%	68.45%	20.20%	16
  19-Jul-23	4.036%	4.037%	0.1	7.1	2.68	9.57%	68.75%	21.68%	12