30-Year Auction Draws Foreign Demand, Domestic Buyers Sit Out

The Treasury sold $22 billion in 30-year bonds Thursday, closing out the week's coupon auctions. The high yield came in at 5.058%.

Foreign buyers took nearly 78% of the offering, well above the six-auction average. Domestic buyers, by contrast, took roughly half their normal share. The bid-to-cover ratio and the tail – the spread between the high yield and the when-issued rate – both landed near their recent averages. Dealers absorbed a typical slice.

CNBC's Rick Santelli graded the auction an A-. The mix tells a more mixed story. The strong indirect bid offset a light direct bid, leaving the overall mechanics near the middle of the range. A B- or C+ is probably fairer.

The 30-year auction followed a $58 billion three-year note sale Tuesday and a $42 billion 10-year note sale Wednesday. Together, the three auctions raised $122 billion in new cash.

The foreign bid has been a consistent feature of recent long-end auctions, reflecting demand from official accounts and overseas asset managers. The domestic pullback this time around may reflect positioning ahead of next week's consumer price index print and the Federal Reserve's rate decision.