US Treasury 20-year auction yields 5.42% amid lowest foreign demand

The US Treasury sold its 20-year bonds at a 5.42% yield-to-maturity on Tuesday, the highest rate for that maturity since 1986. According to the auction data, the government offered a $13 billion sale with a 5.125% coupon but sold the bonds below par, forcing buyers to pay less than face value to achieve the 5.42% return.

The auction failed on three metrics. The clearing rate trailed pre-sale trading by two basis points, marking a record-low spread for the issue since 2024. Indirect bidders, including foreign central banks, took only 52.5% of the sale, down from 62.9% in August and the lowest percentage on record excluding a $25 million special in 2021. Demand fell short of the 2.65 mean seen in the last six sales, registering at just 2.57 times.

Treasury Secretary Scott Bessent told Congress earlier that day, “We then proceeded to have the two most successful treasury auctions that we’ve had in 20 years, and the US bond market, since President Trump has come in, has been the best performing bond market in the developed world.” Representative Jim Himes, a Democrat from Connecticut, responded, “Wait, wait, wait. The 10-year went up by 20 basis points. How can you say it was successful?”

The 5.42% yield sits above the 6.76% average 30-year mortgage rate, a figure that reflects the broader cost of borrowing in the economy. With $40.1 trillion in outstanding debt and annual interest costs exceeding $1.1 trillion, the debt-to-GDP ratio stands at 123%. The next 20-year auction is scheduled for October 21, 2026.