20Y Bond Auction Preview: Pre-Holiday Duration Test

Today's 20Y Bond sale (1130ET) will amount to $12B, unchanged from the previous reopening. This month has not seen strong auctions for long-end Treasuries, with tails for both the 10Y and 30Y sales last week.

• Today's sale sets up as a status check on demand for duration, with the US yield curve steeper since the FOMC meeting (which took place after the 10s and 30s auctions), amid hawkish shifts by the ECB and BoJ.
• A concession in the 20Y yield has built up since the post-CPI yield lows on Dec 7 (3.64%), with a jump yesterday following the BoJ's surprise yield curve control tweak, though yields are off the highs above 3.96% set overnight.
• The 20Y currently has a bid yield of 3.895%, below the WI yields of the Oct and Nov auctions above 4%, but not far from with the 5 auction average WI yields / high yields (3.82%).
• The last auction on Nov 16 was strong, seeing a 3bp trade-through on a 4.072% high yield, with 2.64x bid-to-cover, with primary dealer takeup of 9.3%, indirects 75.4% and directs 15.4%.
• The 5-auction average bid-to-cover is 2.55x, with primary dealers taking 11.3%, indirects 71.9%, and directs 16.9%.
• 3 of the past 5 20Y auctions have traded through.