For a fleeting moment Monday morning, 20-year bonds were no longer offering the highest yields on the US Treasuries curve.
The tenor briefly traded below the longest-maturities by the most in almost four years, sending 20-year yields less than 1 basis point below the 30-year. By noon in New York, the 20-year was up roughly 5 basis points to about 4.99%, almost on par with yields on the longest-maturities. The earlier shift is a part of the broader steepening of the yield curve in recent months as traders demand higher return to hold long-term debt instead of shorter ones — making the 20-year more attractive than the longest-dated bonds.
Treasuries with longer-maturities have been under mounting pressure as lawmakers’ negotiations over tax cuts stoke concerns that President Donald Trump’s policies would swell deficits that are already at historic highs.
The movement “is likely a function of the long-end underperformance amid rising term premium and expectations of foreign investors stepping away,” Gennadiy Goldberg, head of US rates at TD Securities.
Seen as the most unloved US bond, the 20-year had consistently underperformed other Treasuries since the government resumed selling the tenor nearly five years ago after ditching it more than three decades ago.
To alleviate pressure, the Treasury Department has since cut the quarterly sales of the 20-year debt to $42 billion, from a peak of $75 billion in 2021. That helped recalibrate the supply-demand of the bond.
Still, the debate over whether the 20-year bond is even worth issuing remain. Former Treasury Secretary Steven Mnuchin, who brought the bonds out of the vault during the first Trump administration, said last year that it’s time to stop selling the bonds to save taxpayers’ money because of its relatively high issuance costs.
The latest move in the 20- and 30-year yield curve underscores that investors are staying away from long-term bonds. Some investors are even now speculating that the Treasury may also shrink 30-year auctions.
Written by: Ye Xie @Bloomberg
The post “US 20-Year Yields Fall Below Longer Bonds by Most Since 2021” first appeared on Bloomberg