For Bloomberg, Ye Xie covers the aftermath of a disastrous Treasury auction for buyers. A little less than 3 and a half years ago, the world and fixed income markets were in a much different place due to the pandemic and the Fed’s aggressive efforts to flood the market with liquidity. At the time, the 30-year Treasury was auctioned off at a yield of 1.2%, while it now fetches nearly 4.5%.
Thus, buyers of the 30Y have taken a huge loss. In recent weeks, it’s traded around fifty cents on the dollar. Typically, this would mean that holders are concerned about default risk, but this is not the case. Instead, the price is so low because buyers have to be sufficiently compensated given that they can get higher levels of income in so many places.
Simply put, it’s an indication that these buyers essentially top-ticked the Treasury market. Longer-term Treasuries declined by nearly 30% in 2022 and have added to these losses this year as the Fed has remained hawkish for longer than expected. The holders of this specific note include the Fed, ETFs, pensions, and insurance companies.
Finsum: The yield on the 30 year Treasury fell as low as 0.7% during the depths of the pandemic. Now, they are close to 4.5%.