US Dollar, US Treasury Auction, Dollar Index, Inflation – Talking Points

  • US Treasury sells $25 billion of 30-year bonds at high yield of 1.94%, vs. 1.888% pre-auction
  • USD breaks through 94.50, Dollar Index makes fresh one-year highs above 98.84
  • Bonds were already under pressure pre-auction following US CPI data earlier

A weaker-than-expected auction of 30-year Treasury bonds saw a tail of 5.2 basis points, the largest on record for a 30-year auction. For context, the average tail over the last 6 months has been only 0.5 basis points. The US Treasury sold $25 billion of 30-year securities at a high yield of 1.94%, compared to a pre-auction yield of 1.888%. The immediate spike in yields pushed the US Dollar higher, with the Greenback hitting fresh one-year highs above 98.84. Yields had already been moving higher on the session, as US inflation data came in much hotter than expected earlier this morning.

US Dollar Index 30 Minute Chart

US Dollar Jumps to Yearly Highs on the Back of Weak 30-Year Treasury Auction

Chart created on TradingView

Prior to the 30-year auction, US Treasuries were already under pressure following this morning’s hot CPI print. Yields were on the move immediately following the release of the CPI data as market participants rushed to move forward their expectations for Fed rate hikes. The weak auction in the afternoon further exacerbated the march higher in yields, with the curve broadly shifting upward. While the market moves to price in hawkish Fed action, Fed Chair Jerome Powell continues to stick to his guns on the “transitory” nature of inflation.

30-Year Auction Results

  • High Yield Rate: 1.940% (prev 2.049%)
  • Bid-Cover Ratio: 2.2 (prev 2.36)
  • Direct Accepted: 15.8% (prev 17.2%)
  • Indirect Accepted: 59.0% (prev 70.5%)
  • WI: 1.888%

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— Written by Brendan Fagan, Intern

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