Today's 20-year US Treasury auction will serve as a barometer for ultra-long duration. Today's 20-year US Treasury auction will serve as a barometer for ultra-long duration. Today's 20-year US Treasury auction will serve as a barometer for ultra-long duration.

Today's 20-year US Treasury auction will serve as a barometer for ultra-long duration.

Althea Spinozzi

Head of Fixed Income Strategy

Summary:  If investors are unwilling to increase their portfolio duration, poor demand can reignite the bear-steepening of the yield curve, causing volatility in financial markets. Yet, the upcoming Thanksgiving break might limit volatility as traders prepare to leave for the holidays.

Why is today's 20-year US Treasury bond auction important?

Markets are concerned that today could be a repeat of the ugly 30-year US Treasury auction at the beginning of the month. At that time, dealers were forced to buy 24.7% of the amount issued, almost double what they had to absorb on average since the beginning of the year for auctions of the same tenor. Primary dealers must buy the debt not purchased by other bidders during a US Treasury auction. Therefore, an increase in their take is synonymous with deteriorating demand.

November's 30-year auction tailed When Issued by 5.3 basis points, the most on record (since 2016), provoking a deep selloff in the bond and stock market. Although it is unclear whether a ransomware attack on ICBC weakened demand, it's key to note that indirect bidders were sensible lower, making issues concerning ICBC unlikely to be the only contributors to deteriorating demand. It is more likely that declining demand was caused by the sudden drop in yield, which saw 30-year bonds getting almost 50bps more expensive from their peak at 5.14%.

That brings us to today, as the 20-year US Treasury note pays a yield of 4.8%, roughly 45bps below the high yield at October's auction.

It will be key to see whether investors are willing to extend the duration at current levels or are demanding a higher yield.

Nonetheless, if demand increases, it could give the green light to bond bulls, and the yield curve can further bull-flatten, pushing 10-year yields towards 4%. Yet, a rally might be contained. From September until today, leveraged funds have reduced their short positions in 20-year T bond futures. Therefore, today, a solid 20-year US Treasury auction might not trigger enough short covering to push 10-year yields below support at 4.36%.

Why do investors dislike 20-year US Treasuries?

Markets usually dislike 20-year U S Treasury bonds because they are the less liquid tenor in the US Treasury yield curve besides proving high duration risk. That's why the 20-year is one of the cheapest bonds within the Treasury markets, now paying 4.83% in yield, while the 10- and 30-year Treasuries pay 4.46% and 4.62%, respectively.

The 20-year tenor was reintroduced in 2020 amid the COVID-19 pandemic to increase the Treasury's financing capacity over the long term while funding the government at the least possible cost to taxpayers over time. Before that, auctions for this tenor were discontinued in 1986 because of the higher funding cost compared to other yield curve maturities. The same argument can be made today; however, with the yield curve still slightly inverted, 20-year US Treasuries still pay a lower yield than the 2-year notes.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.