The 30-Year Treasury’s long bond auction generated $16 billion in long-term debt today. The 2.75% coupon bonds will mature on November 15, 2042 and this sale was actually $16.564 billion on a non-competitive basis to foreign and international monetary authority accounts. Other non-competitive buyers were involved as well.

Of the accepted bids, the following went to each bidding group: Primary Dealers $6.73 billion; Direct Bidders $1.98 billion; and Indirect Bidders $7.26 billion.

Today’s maximum award was listed as $5.6 billion in the preliminary data. The prevailing 30-year yield had been 2.85% before the auction but the yield at the sale was 2.82%. Lower yields mean higher prices. Treasury said that the bid-to-cover was 2.77 for this 30-year auction with competitive bids tendered of $44.287 billion. That ratio is higher than the average of late and looks like it is the highest bid-to-cover ratio of 2012 on a long bond auction.

The low yield was 2.75% and the median yield was 2.80%. Rick Santelli of CNBC said that this was a “Solid A Auction” in his usual grading.

It is hard to fathom buying 30-year debt for a pre-tax return of only 2.82%. This is another example of how the investing public is chasing return of capital still rather than a return on capital.

JON C. OGG

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