Strong U.S. 2-Year Auction as Global Yields Fall on Japan Bond Supply Shift — Evening Brief – 05.27.25 

The U.S. Treasury kicked off the week’s auctions with the sale of $69 billion in 2-year notes, priced at a 3.955% high yield, rising from 3.795% in April but remaining below March’s 3.984% and the previous five auctions, all of which priced above 4%. The auction stopped through the 3.965% When Issued by one basis point, marking the third stop-through in the past four auctions. The bid-to-cover ratio stood at 2.567, slightly higher than last month’s 2.515, but below the six-auction average of 2.648. 

Auction internals indicated solid investor participation, with Indirect bidders awarded 63.3%, up from 56.2% in April, while Direct bidders secured 26.2%—the second highest this decade. Dealers retained 10.5%, lower than April’s 13.7% and just under the six-auction average of 10.9%. 

Japan’s Ministry of Finance announcement overnight to trim ultra-long-dated 30-year and 40-year bond supply, following record-high Japanese yields eased global yield pressures. This move, reported by Reuters and Bloomberg, triggered a decline in yields worldwide, aiding the U.S. auction’s success. The U.S. 10-year yield has dropped 20 basis points over the past two trading days to 4.43%, a seven-day low, while the 30-year yield has fallen 20 basis points as well to 4.94%, dipping below 5% for the first time in a week. 

Upcoming auctions include a $70 billion 5-year note on Wednesday and a $44 billion 7-year note on Thursday, with investors hoping for more well-received auctions to reinforce the rebound and further ease concerns about demand for U.S. government debt after last week’s turbulence.