With the improvement in demand for the 20-year US bond auction on Monday, traders in the US bond market seem to finally be able to temporarily relax before the Thanksgiving holiday - overnight long-term US bond yields generally fell further, complementing the rise of US technology stocks.
The US Treasury Department conducted a $16 billion auction of 20 year US Treasury bonds on Monday, resulting in a yield of 4.78%, lower than the market trading yield of approximately 4.810% half an hour before the auction. This is also the first time since March that the yield of the 20 year US bond auction has fallen.
Although the bidding multiple for this auction is not impressive, it is also relatively stable overall: the bidding multiple ultimately reached 2.58, which is roughly the same as last month's 2.59, but lower than the average level of 2.67 in recent times.
What is relatively satisfactory is the allocation ratio for this auction: the allocation ratio for indirect buyers, including official institutions such as overseas central banks and private investors, reached 74.0%, the highest level since June this year; The proportion of primary dealers who have the obligation to purchase all failed bonds to prevent abortive auctions was 9.5%, lower than the average of 10.2% in the past six auctions; In addition, the allocation rate for direct buyers, including the Federal Reserve and other US federal government entities, was 16.5%, up from 15.2% in October.
Ben Jeffery, interest rate strategist of BMO Capital Market in New York, said, "The auction of 20-year bonds obviously found a quite stable bid, especially after the 30-year treasury bond bond auction was so bad a few weeks ago."
He was referring to the 30 year US bond auction on November 9th, which recorded one of the worst results of the past decade, and the well-known financial blog Zerohidge even used the term "complete disaster" to describe it.
Jeffery also pointed out that "people are still worried about what the increase in the total supply and net issuance of treasury bond means to the interest rate level. However, we are beginning to see some signs of stronger demand for duration, and the flattening of the bull market of the (yield) curve resonates with this response."
When long-term bond yields decline faster than short-term yields and flatten the yield curve, a bull market flattening phenomenon occurs, which is seen as a bullish signal for the stock market and economy.
As of the end of Monday's New York session, long-term US Treasury yields generally slightly declined, with 10-year US Treasury yields further reaching their lowest closing level since September 20th. Among them, the two-year US Treasury yield increased by 2.3 basis points to 4.919%, the five-year US Treasury yield decreased by 1 basis point to 4.445%, the 10-year US Treasury yield decreased by 2.3 basis points to 4.425%, and the 30-year US Treasury yield decreased by 2.3 basis points to 4.574%.
For David Coombs, head of multi asset investment at UK investment management firm Rathbones, US government bonds are still a high-quality investment target that cannot be missed at the moment.
Coombs has recently been buying US treasury bond bonds for the first time in 15 years; He was attracted by the rise in yields and the opportunity to increase these returns through exposure to the US dollar. At present, US treasury bond bonds account for 9% of its investment portfolio, even more than its allocation of UK bonds, accounting for nearly half of its total fixed income assets.
Shaniel Ramjee, a fund manager of Baida Asset Management in Switzerland, also stepped up the purchase of US treasury bond bonds when the yield of US 10-year treasury bond bonds reached 5% last month. Ramjee stated that he remains concerned about the US government's expanding deficit. But few government bonds in other developed markets can provide a real yield comparable to that of US treasury bond bonds - that is, the difference between the nominal yield level and the expected inflation rate.