US Treasury’s 20-year auction hits highest yield since 2020 as foreign demand craters to record low

The US Treasury tried to sell $13 billion in 20-year bonds on September 15. The market’s response was something between a shrug and a grimace.

The auction cleared at a yield of 5.420%, the highest since the 20-year bond was reintroduced in May 2020. That’s a sharp jump from August’s 5.204%.

But the yield wasn’t the real story. Foreign demand, measured by the share awarded to indirect bidders, collapsed to 52.5%, the lowest on record for the 20-year maturity. That’s down from 62.9% just one month earlier, a drop of more than 10 percentage points.

Inside the numbers

The auction tailed the when-issued level by 2.0 basis points, meaning the government had to pay meaningfully more than where the bonds were trading in the secondary market to get the deal done. That’s the widest tail since 2024.

The bid-to-cover ratio came in at 2.57. That technically topped August’s 2.53 but still fell short of the recent average of 2.65.

With foreign buyers stepping back, direct bidders stepped up to a record 30.7% allocation. Primary dealers were left holding 16.9%.

Why foreign demand is drying up

The timing is notable. Earlier auctions during the same week reportedly showed stronger results, which makes the 20-year outcome look less like a broad market selloff and more like a maturity-specific problem.

What this means for markets

When the 20-year yield jumps more than 20 basis points in a single month, it tightens financial conditions whether or not the Federal Reserve changes its policy rate.

The record direct bidder share offers a partial silver lining. Domestic institutions are apparently willing to absorb supply at these yields, suggesting there’s a price at which American buyers find long-duration Treasuries attractive.

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