Bond auction update: CPI numbers don’t move bonds, but weak demand leaves US Treasuries volatile Bond auction update: CPI numbers don’t move bonds, but weak demand leaves US Treasuries volatile Bond auction update: CPI numbers don’t move bonds, but weak demand leaves US Treasuries volatile

Bond auction update: CPI numbers don’t move bonds, but weak demand leaves US Treasuries volatile

Althea Spinozzi

Head of Fixed Income Strategy

Summary:  Although today's surprise in CPI figures was priced in US Treasuries, we believe that demand for the US safe-havens remains weak, exposing investors to selloff risk. Everything points to a smooth 30-year US Treasury auction today. However, there is a chance to see a selloff in Treasuries if the bid-to-cover ratio is below 2.1x. We expect an uptick in demand only when 10-year yields rise to 2%. In the meantime, Italy saw solid demand for 3- and 15-year bonds, indicating that investors are ready for more and longer BTPS issuances. The 50-year Gilts reopening in the UK was successful. Still, bidding metrics were weaker than February despite the higher yield offered, indicating that investors are wary of duration.

Today's CPI numbers surprised at 2.6% YoY versus 2.5% expected. The move was fully priced in the bond market; thus, volatility was contained, paving the way for a smooth 30-year auction. Yet, we believe that yesterday’s 3- and 10-year bond auctions have highlighted a problem: demand for US Treasury remains weak. Indeed, both bonds' bid-to-cover ratio and foreign bids were below their one-year averages. It means that the market is still on hedge and that investors are ready to dump US Treasuries amid any surprise.

All in all, the auction results are depressive news for bond bulls, especially for those holding bonds with high duration. Hence, we believe there is still the possibility that today's 30-year US Treasury auction could go south.

Following are today's 30-year auction possible scenarios:

  • “Apocalypse now”: bid-to-cover below 2.1x, the lowest since 2018. It can trigger a deep selloff in US Treasuries that will push 10-year yields to test 1.75%
  • “Chill out”: bid-to-cover between 2.1x and 2.30x showing that the music is not stopping, but bond investors remain nervous, waiting for another day to dump US Treasuries

The latter looks likely today. However, it's imperative to accept that an apocalyptic scenario is doomed to happen as economic and inflation pressures accelerate. We expect that the 10-year yield will hit 2% by summer. Only then US Treasury will find real support from foreign investors.

Demand for Italian BTPS remains solid. Are we going to see new ultras?

In the old continent, we saw Italy issuing 3-, 5- and 15-year BTPS this morning. Despite last week Draghi announced that the country would increase its debt by EUR 40 billion, demand for BTPS was solid with a bid-to-cover ratio slightly below the 5-year average. Additionally, the Italian Treasury issued almost double the amount of 15-year bonds it did in December, without hiccups.

The auction results strengthen our view that Italy continues to be in a position of strength and that the market could easily digest any issuance of Italian ultra-long debt beyond 50-years.

Although Italian government bond yields remain a couple of basis points higher on the day, BTPS are still Europe's best-performing government bonds. Today, 15-year BTPS yields rose to the highest level since October 2020, widening just 20 basis points since the beginning of the year. Comparatively, French 15-year bond yields rose 50 basis points year to date.

Positive sentiment in Italian government bonds can be explained by the entrance of Draghi in the country's politics and by the higher yield that they provide compared to peers.

Source: Bloomberg and Saxo Group.

Appetite for ultras is tested by 2071 Gilts reopening

The United Kingdom reopened the 50-year bond issuance with 2071 maturity amid good demand from long-term real money investors. Bidding metrics were solid but below the auction of February the 2nd, which saw the Debt Management Office issuing the same Gilts at 0.74% in yield. Today, the same bonds were sold with a yield of 1.11%. It shows that despite Gilts offer higher yields compared to a few months back; investors remain wary of duration amid rising yields in the United States.


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.