Weak US 30-year bond sale caps week of subpar Treasury auctions

• US 30-year bond auction shows poor demand, cover ratio at 2.27
• August is seasonally negative for 30-year bond supply -analyst
• End-user demand was lowest since August 2024

NEW YORK, Aug 7 (Reuters) - The U.S. Treasury's sale on Thursday of new 30-year bonds amounting to $25 billion showed poor demand, wrapping up a week of disappointing auctions that resurrected doubts about investor demand in the world's largest fixed-income market.

Investor demand for Treasuries, specifically from foreigners, has been a litmus test for U.S. assets since President Donald Trump announced a wide range of tariffs globally on April 2.

Thursday's 30-year bond auction had some of the worst metrics for the year.

"The auction results, especially for the 30-year, (are) concerning," said Will Compernolle, macro strategist, at FHN Financial in Chicago.

"But people have been talking about investor fear and foreign buyers' strike and I haven't really seen that in the data. This could be summer doldrums."

The bid-to-cover ratio, a measure of investor demand, was 2.27, a level not seen since November 2023.

U.S. 30-year Treasuries were sold off after the auction, pushing their yields higher on the day. They were last up 1.5 basis points (bps) at 4.826% US30YT=RR.

This followed an equally weak 10-year sale on Wednesday, with primary dealers taking in 16.2% of the total supply, the largest takedown by percentage in a year. That suggested low appetite for the new issue.

Vail Hartman, U.S. rates strategist at BMO Capital, said in a research note that the month of August is "seasonally negative for 30-year supply."

He noted that since 2009, just one 30-year auction for August managed to go smoothly and that was in 2014. On the other hand, there were 13 auctions that "tailed," or were weak, in which investors demanded a higher yield for the bond.

Primary dealers accepted 17.5% of the 30-year supply, the highest in a year, a negative sign.

The U.S. three-year note auction on Tuesday was also soft, with indirect bids, which include foreign investors, showing the weakest demand in two years.

The 30-year sale was priced at 4.813%, about 2 bps higher than the market's forecast in when-issued trading at the bid deadline. The 2 bps "tail" meant market participants demanded a premium to purchase the bond.

"The results aren't too surprising because of the tails in the three-year and the 10-year auctions," FHN's Compernolle said. "I'm not sure that the bond market is really taking any signal from these weak results."

Still, details of the poorly received 30-year auction cannot be ignored, analysts said.

Indirect bidders were awarded 59.5% of supply, lower than the 59.8% seen in the July sale and the 62% average of the last six auctions.

End-user demand, which combines both indirect and direct bids, slumped to 82.5%, the worst since August 2024.