A 20-year Treasury auction cleared at 5.469% in the same week pending home sales fell 7.3% to a record low and mortgage applications dropped for a seventh week. The long end, not the Fed's 3.75% to 4.00% range, is setting what housing costs.
The Kobeissi Letter’s NAR series puts September pending sales at a 2001-era record after a 7.3% drop, with the West down 9.2% as mortgage rates near 7.4% freeze demand. Source
Wednesday's $13bn reopening of the 20-year bond cleared at 5.469%, up from 5.420% in September. The Wall Street Journal called it the highest 20-year auction yield since January 1986, but that comparison is thin: the 20-year was discontinued in 1986 and only reintroduced in 2020. Demand held up anyway. Bid-to-cover was 2.73 (previous: 2.57), indirect bidders (a proxy for foreign and institutional demand) took 58.2%, and dealers were left with 10.3%. The stop tailed the when-issued yield, where the bond traded just before the sale, of about 5.459% by roughly 0.9 basis points. Buyers showed up, but only at that price.
